Cover Photos

1

2

1. Leighton Hill development in 2. Le Sommet, North Point 3. One International Finance Centre, above Kong 3 Station on the Airport Railway 4 4. SmarTone Telecommunications 5. Route 3 (Country Park Section)

6. Business Aviation Centre

5

6 LIMITED

Annual Report1998-99

Web site : http://www.shkp.com.hk Contents

4 Corporate Information

5 Shareholders’ Information

6 Financial Highlights

8 Corporate Structure

10 Chairman’s Statement

24 Directors’ Report

Review of Operations 34

Land Bank 36

Property Development 39

Property Investment 53

Related Business Activities 64

Infrastructure and Transportation 71

Other Investment Holdings 80

Mainland China Business 81

Group Finance 85

Investor Relations 86

Customer Service 87

Environmental Protection and Promotion 90

Staff Relations and Training 92

The Group and The Community 94

96 Management Discussion and Analysis

107 Group Financial Summary

109 Directors and Organisation

A1 Report of the Auditors

A3 Principal Accounting Policies

A15 Consolidated Profit and Loss Account

A16 Consolidated Balance Sheet

A17 Parent Company Balance Sheet

A18 Consolidated Cash Flow Statement

A19 Notes to the Financial Statements

A35 Principal Subsidiaries

A45 Principal Jointly Controlled Entities

A48 Principal Associated Companies Corporate Information

Directors KWOK Ping-sheung, Walter Chairman & Chief Executive LEE Shau-kee Vice Chairman KWOK Ping-kwong, Thomas Vice Chairman & Managing Director KWOK Ping-luen, Raymond Vice Chairman & Managing Director HO Tim Independent Non-Executive Director WOO Po-shing Independent Non-Executive Director FUNG Kwok-king, Victor Independent Non-Executive Director KWAN Cheuk-yin, William Independent Non-Executive Director LO Chiu-chun, Clement Non-Executive Director LAW King-wan Executive Director CHAN Kai-ming Executive Director CHAN Kui-yuen, Thomas Executive Director KWONG Chun Executive Director WONG Yick-kam, Michael Executive Director WONG Chik-wing, Mike Executive Director Secretary LAI Ho-kai, Ernest Registered Office 30 45th Floor, , 45 30 , Wanchai, Hong Kong. (852) 2827 8111 Telephone: (852) 2827 8111 (852) 2827 2862 Facsimile: (852) 2827 2862 http://www.shkp.com.hk Internet: http://www.shkp.com.hk [email protected] E-mail: [email protected] Auditors Deloitte Touche Tohmatsu Registrars 183 Central Registration Hong Kong Limited 17 1712-6 Shops 1712-6, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong. Principal Bankers The Hongkong & Shanghai Banking Corporation Limited Limited Standard Chartered Bank The Bank of Tokyo – Mitsubishi Limited The Sanwa Bank Limited The Sumitomo Bank, Limited The Chase Manhattan Bank Banque Nationale de Paris ABN Amro Bank Solicitors Woo, Kwan, Lee & Lo Johnson, Stokes & Master Winston Chu & Company 4 Shareholders’ Information

Shareholders’ Calendar

Close for Register of Members 25/11/1999 - 2/12/1999 (both days inclusive)

Annual General Meeting 2/12/1999 Dividends

Interim (per share) HK$0.50 Paid on 15/4/1999

Final (per share) HK$1.05 Payable on 3/12/1999

Security Code

Stock code 16

American Depositary Receipt CUSIP number 86676H302 Trading symbol SUHJY Ordinary share to ADR ratio 1:1 Listing Level One (OTC) Depositary Bank Citibank, N. A. ADR Department, 20th Floor, 111 Wall Street, New York, N.Y.10043 Toll-free telephone number 1-877-CITI-ADR (1-877-248-4237)

5 Financial Highlights

For the year ended 30th June

Turnover (HK$ million)

Profit attributable to shareholders (HK$ million)

• excluding exceptional items • including exceptional items

Earnings per share (HK$)

• excluding exceptional items • including exceptional items

Dividends per share (HK$)

Shareholders’ funds per share (HK$)

Gross rental income (HK$ million)

Net rental income (HK$ million)

* Net recurrent earnings before interest and tax* (HK$ million)

Net debt to shareholders’ funds ratio (%)

Land bank (million square feet)

* * Including contributions from jointly controlled entities and associated companies

6 Financial Highlights (cont’d)

Turnover

1999 1998 % Change HK$ Million 30,000 28,960

25,000 23,222 23,680 22,619 23,680 23,222 +2% 20,000 19,845

15,000

10,000

8,683 11,960 -27% 5,000

9,278 7,260 +28% 0 1995 1996 1997 1998 1999 Year

Earnings and Dividends Per Share

HK$ 3.62 5.00 -28% 6 5.93

5 3.87 3.04 +27% 4.69 4.46

4 3.87

3.04 1.55 1.20 +29% 3 2.35

2 1.75 1.86 1.55 1.20 44.40 47.55 -7% 1

0 1995 1996 1997 1998 1999 Year 5,510 5,650 -2%

Net Asset Value Per Share*

4,203 4,443 -5% HK$ 60 56.38

50 47.55 45.10 44.40 5,803 6,189 -6% 41.40 40

30 12.0 17.8 -33% 20

10

50.6 50.6 0 1995 1996 1997 1998 1999 Year

7 Corporate Structure

33% 26%

50% 65%

100% 35%

33% 20%

28.5%

50%

* 8 Corporate Structure (cont’d)

Sun Hung Kai Properties*

Mainland Hong Kong China

Property Infrastructure Property Property Property Related & Development Development Investment Business Transportation & Investment

18.5 million 27.9 million Mobile Phone 0.6 million sq.ft. completed Franchised Bus sq.ft. under Hotels Operation sq.ft. under investment (KMB*) development properties (SmarTone*) development 33% 26% 1.7 million 21 million Airport Freight 4.2 million sq.ft. completed sq.ft. of agricultural Toll Road Forwarding land sq.ft. under Construction investment (Route 3 CPS) Centre (site area) development properties 50% 65% Transport Property Infrastructure Business Management Management Aviation Centre (Wilson Group)

100% 35%

Financial River Trade Landfill & Waste Services Terminal Management

33% 20%

Container Insurance Terminal (CT9)

28.5%

Mid-Stream Operation

50%

* Listed in Hong Kong 9 Chairman’s Statement

I am pleased to present my report to the shareholders:

Results The Group’s profit after taxation and minority interests for the year ended 30th June 1999 was HK$9,278 million, an increase of 28 per cent compared with last year’s profit of HK$7,260 million. Earnings per share for the year was HK$3.87, representing an increase of 27 per cent compared with HK$3.04 for the previous year.

Dividends The Directors have recommended the payment of a final dividend for the year ended 30th June 1999 of HK$1.05 per share. Together with the interim dividend of HK$0.50 per share, the total dividend for the full year is HK$1.55 per share, representing an increase of 29 per cent when compared with the previous year.

Le Sommet (left) in North Point and The Belcher’s (bottom) in Mid-Levels West both sold extremely well when they were launched.

10 Chairman’s Statement (cont’d)

Review

Sales

During the year ended 30th June 1999, total property sales generated by the Group, both as principal and as agent, amounted to HK$21,904 million, compared with last year’s sales of HK$25,916 million. Major projects marketed during the period included Scenic View in Ngau Chi Wan, Grand Horizon in , Castello in Shatin, Le Sommet in North Point, Chelsea Heights Phase 2 in Tuen Mun and The Belcher’s Phase 1 in Mid- Levels West.

During the year under review, the Group completed the following twelve projects, with an attributable gross floor area of about 5 million square feet:

Group’s Attributable Project Location Usage Interest Gross Floor Area (%) (square feet)

100 1,328,500 Symphony Bay Sai Sha Road, Residential Sai Kung

100 1,050,000 Grand Pacific Views Road, Residential/ & Grand Pacific Heights Tuen Mun Shops

1 20 192,800 Crescent Tung Chung Town Residential (Blocks 1 - 6) Lot 1

1 5 100 165,900 Waterfront South 1 - 5 Yue Wok Street, Residential/ Aberdeen Shops

8 22.5 158,000 8 Street, Residential Phase 2 Tsing Yi

11 Chairman’s Statement (cont’d)

Group’s Attributable Project Location Usage Interest Gross Floor Area (%) (square feet)

1 100 144,000 Chateau Royale 1 Yung Yi Road, Residential Tai Po

100 144,000 Hillview Court Pak Shek Wo, Residential Sai Kung

8 100 100,700 Le Palais 8 Pak Pat Shan Road, Residential Tai Tam

3 8 92,400 Belair Monte 3 Ma Sik Road, Fanling Residential/ Shopping Centre

1 7 22,200 Greenfields 1 Fung Kam Street, Residential

* 388 100 1,230,000 Millennium City 388 Kwun Tong Road, Office Phase 1* East

* 1 47.5 373,000 One International 1 Harbour View Street, Office Finance Centre* Central

Total 5,001,500

* * Retained for investment, except 300,000 square feet of Millennium City Phase 1, which was sold to an end-user.

12 Chairman’s Statement (cont’d)

Approximately 95 per cent of the residential units completed and marketed during the year have been sold.

Land Bank

During the year, the Group added a total of 3.8 million square feet of attributable gross floor area to its land bank through land use conversion and other means:

Attributable Group’s Attributable Gross Floor Project Usage Interest Site Area Area (%) (square feet) (square feet)

504 100 314,000 1,743,000 Lot 504 Residential/ Commercial

736,000 (additional plot ratio) Residential Joint Venture N/A

399 100 125,000 375,000 Tuen Mun Town Lot 399 Residential

1 31,600 158,000 1 Ho Man Tin Hill Road Residential Joint Venture

100 123,600 152,000 To Fung Shan Residential Phases 3 & 4, Shatin

6328 35.44 72,000 590,000 NKIL 6328, Residential/ Commercial/ Hotel

Total 666,200 3,754,000

13 Chairman’s Statement (cont’d)

In addition, the Group recently acquired two other sites, 418A 418 A 129 Kwun Tong Road and AIL 129 in . The Group owns 100 per cent of the Kwun Tong site, which has a developable gross floor area of 133,000 square feet for office use. The Group has a 35 per cent interest in the Ap Lei Chau site, which has an attributable gross floor area of 316,000 square feet that it plans to change to residential use.

At the end of the year under review, the Group owned a land bank of 50.6 million square feet in Hong Kong, in terms of attributable gross floor area. This consisted of 18.5 million square feet of completed investment properties and 32.1 million square feet of properties under development. The Group also owns 21 million square feet of agricultural land in the , the majority of which is in the process of land use conversion.

Property Development

Following the economic downturn in 1998, Hong Kong’s economy started to register positive growth in the second quarter of 1999. Total exports started to rebound and the number of visitors grew continually. At the same time, consumer sentiment began to strengthen, the unemployment rate moderated and liquidity improved with stable interest rates.

After the significant drop in 1998, property prices have stabilized and are now within reach for the majority of families. This, coupled with the pronounced reduction in mortgage rates, means that affordability is at its highest in eight years. The residential property market is now healthier, driven by end-user demand, with virtually no speculative activity. Banks are enthusiastic about residential mortgage financing, offering competitive, attractive terms to homebuyers. The Government also continued to encourage home ownership by providing subsidized loans to first-time buyers. All this, together with improved economic prospects and stabilized interest rates, has had a positive influence on the housing market.

14 Chairman’s Statement (cont’d)

The Group will continue to focus its property business in Hong Kong, with an emphasis on large-scale projects containing small and medium sized residential units to meet market demand. The Group will also incorporate new technologies in its developments, while constantly improving its quality and comprehensive facilities for residents. The Group will continue to increase the volume of its residential completions in the next few years, while stringently controlling costs to enhance development returns. In the next financial year, the Group expects to complete properties with an attributable gross floor area of 4.4 million square feet as follows:

Residential Shopping Centre Office Total million square feet

For Sale 4.1 4.1

For Investment 0.1 0.2 0.3

Total 4.1 0.1 0.2 4.4

The Group will continue to increase its land bank through various means. Some industrial sites will be converted into other uses, such as residential, service apartments and offices. Conversion of agricultural land to residential use will continue to be the major source of land for new developments, and the Group is now actively negotiating with the Government on land conversion and land premiums. Most of these properties are located near future railway stations, and with the construction of various large-scale infrastructure projects, the New Territories has great development potential.

The Group will develop a large-scale project in Tseung Kwan O, providing about 4,000 small to medium sized residential units.

15 Chairman’s Statement (cont’d)

Property Investment

As the Group adheres to its flexible approach to leasing, its investment property portfolio is 95 per cent let. Despite the rental market adjustments over the past one and a half years, gross rental income for the year, including the Group’s share in jointly controlled entities, saw only a one per cent decline from the previous year to HK$5,801 million. The minimal decline was due to an additional 1.3 million square feet of newly-completed investment properties, along with the relative resilience of the Group’s shopping centres, as the majority are in the new towns, primarily offering daily necessities to nearby residents.

The Group has a 47.5 per cent interest in One International Finance Centre, strategically located above Hong Kong Station on the Airport Railway, on the waterfront in the core of Central. The three-storey, 131,000 square-foot shopping centre is open and over 90 per cent let, and the intelligent 38-storey office tower, with 784,000 square feet of high-quality space, is 80 per cent let.

Millennium City Phase 1 in Kowloon East was completed late last year, and its 930,000 square feet of office space is now fully let. In view of the encouraging response, the Group recently began leasing Phase 2, which is scheduled for completion in the fourth quarter of 1999. The Group has a 50 per cent interest in Phase 2,

The office space in Millennium City Phase 1 in Kowloon East is fully let.

16 Chairman’s Statement (cont’d)

which will provide 267,000 square feet of offices. The Group’s annual rental income from Millennium City Phases 1 and 2 is estimated to exceed HK$170 million.

The downside of retail rents should be limited because of improving retail sales and higher tourist arrivals. Rents in the luxury residential market have also shown signs of stability, while in the office market, prime space offering advanced technological features and state-of-the-art facilities is expected to continue to be in demand.

The Group aims to maintain an optimal rental portfolio by developing quality projects for rent and disposing of some non- core investment properties.

Hotel Business

Hotel occupancy improved during the year on the back of a continual increase in tourist arrivals, and average room rates stabilized after a significant decline last year. In the long run, with Hong Kong as an international business and tourist hub, hotel prospects should be promising.

Despite the difficult operating environment over the year, the performance of the Group’s three hotels was encouraging, with improved occupancy rates. The Royal Garden Hotel in , Royal Park Hotel in Shatin and Royal Plaza Hotel in Mongkok achieved average occupancy rates of 85, 86 and 80 per cent respectively.

Infrastructure and Transportation

SmarTone reported a decline in net profit for the 1998-99 financial year. Despite keen competition, SmarTone secured its market position through continuous efforts to provide premium customer service, quality network coverage and comprehensive value added service. With British Telecommunications plc becoming a strategic shareholder in May 1999, SmarTone is in an even better position to get access to advanced technology, with broader opportunities to expand in Asia. In addition to mobile voice services, SmarTone will continue to focus on business 17 Chairman’s Statement (cont’d)

expansion, including IDD, the Internet and wireless data applications. The company will also look for investment opportunities in the region. The Group is confident of SmarTone’s future prospects, and it will continue to hold its interest in the company as a strategic long-term investment.

The Holdings Limited recorded satisfactory results for the year. The company expanded its business through the operation of new routes linking the urban areas to the new airport and Tung Chung, and it has increased its non-franchised bus operations to cope with growing market demand. The company aims to stay competitive with the continued provision of high-quality service and improvements in efficiency, and is expected to provide steady recurrent income to the Group.

The Route 3 (Country Park Section) provides a quick and direct link between the northwest New Territories and major urban areas, as well as the new airport. There has been a continuous improvement in traffic volume since its opening in May 1998.

The Airport Freight Forwarding Centre comprises 1.3 million square feet of cargo handling space and 175,000 square feet of office space. It commenced operations in July 1998. The Hong Kong Business Aviation Centre officially opened in September 1999, providing premium ground services for corporate and private aircraft.

The Hong Kong Business Aviation Centre officially opened in September this year.

Construction of the River Trade Terminal in Tuen Mun is progressing smoothly. The first phase operating area began business in October 1998, and completion of the entire project is scheduled for the end of 1999. 18 Chairman’s Statement (cont’d)

The Group has a 28.5 per cent interest in Asia Container Terminals Limited, which is engaged in the development of two berths in Container Terminal 9. The terminal is now being designed and construction is expected to begin in early 2000. Upon completion, the berths will be exchanged for two existing berths in Container Terminal 8.

All of the Group’s infrastructure projects are in Hong Kong. They are low risk in nature and provide the Group with growing recurrent income over the long term.

Mainland China Business

The Group will continue with its prudent and selective policy towards investing in mainland China. It will focus on property projects in Beijing, Shanghai and , adopting a long- term view and retaining most developments for rental purposes.

Sun Dong An Plaza in Beijing contains 1.3 million square feet of retail space and 430,000 square feet of office space. Since renovations to Wangfujing Street have finished, there has been a significant increase in the flow of pedestrians to the , bringing more business to the tenants. Leasing of the office tower has been satisfactory, with occupancy at 80 per cent.

Since renovations to Wangfujing Street finished, there has been a significant increase in the flow of pedestrians to the Sun Dong An Plaza shopping mall in Beijing.

19 Chairman’s Statement (cont’d)

Shanghai Central Plaza, with 455,000 square feet of office space and 133,000 square feet of retail space, was finished in early 1999. It has become a showcase for quality development in Shanghai. The shopping centre is already 90 per cent let and leasing of the offices is progressing well. Phase 1 of Arcadia Shanghai, with 369 luxury residential units, was finished in the second quarter of 1999, and leasing is now under way.

Nearly all of the units marketed in Glorious Phase 2 in Guangzhou have been sold, and the project is scheduled for completion in the first half of 2000.

Corporate Finance

The Group will adhere to its conservative policy of maintaining a low gearing and high liquidity. It further strengthened its financial position over the year, and as of 30th June 1999, its ratio of net debt to shareholders’ funds was 12 per cent. The Group’s solid recurrent income base, together with proceeds from pre-sales of new residential properties, will continue to sustain a strong cash flow.

The Group has substantial undrawn facilities on a committed basis on standby for future business expansion, and as virtually all of its borrowings are denominated in Hong Kong dollars, its foreign exchange exposure is negligible. All the Group’s bank facilities are A3 unsecured. The Group has been able to maintain its foreign A currency credit ratings on a par with Hong Kong’s sovereign ceiling, with “A3” from Moody’s and “A” from Standard & Poor’s. The Group will continue to diversify its funding base and lengthen its debt maturity profile with the objective of spreading debt maturity in future years.

Since launching its Euro Medium Term Note programme in early 1999, the Group has raised the equivalent of approximately US$400 million through several Hong Kong dollar bonds and a floating rate US dollar note. The proceeds were used mainly to repay short-term loans. In light of the good market response, the Group decided to triple the authorized programme size to US$1.5 billion in September. The programme offers the Group flexibility in tapping funds from the international capital markets and enables it to issue notes efficiently. 20 Chairman’s Statement (cont’d)

Customer Service

The Group is committed to raising the overall quality of its property developments in terms of design, materials and construction, and it will continue to set new standards in these areas. The Group will also capitalize on the opportunities presented by new technology to meet the increasing demand for a more active digital lifestyle by making broadband access available in its property developments.

Providing the highest levels of service is one of the Group’s top priorities, and its property management subsidiaries, Hong Yip and Kai Shing, are committed to providing residents with the finest care to enhance their lives for the modern age. With continual training they will embody the spirit of “customer first”. As evidence of this dedication, both companies received various territory-wide management awards during the year.

The SHKP Club has seen a significant increase in members during the year, to about 95,000. The Club will continue to enhance the quality of its service to members and promote two- way communication, and the up-grading of the co-branded Citibank SHKP Club VISA Card to a multifunctional smart card with the latest technology will offer more convenience and added value to members.

Mr , the Group’s Vice Chairman, announced the upgrade of the Citibank SHKP Club VISA Card to a multifunctional smart card.

21 Chairman’s Statement (cont’d)

Prospects With the People’s Republic of China’s 50th anniversary this year, its society is stable and prosperous. China’s open door policy and economic reforms will continue, and it is expected to gain access to the WTO in the near future. Prospects for the mainland economy remain positive. In this advantageous environment, the Group has full confidence in the long-term prospects for Hong Kong. Japan and the rest of Asia have seen continued economic improvement. A significant drop in rents and downward adjustments to labour costs have made Hong Kong more competitive. These, together with low interest rates and the construction of new infrastructure, should underpin Hong Kong’s current economic recovery. The Government’s efforts to lead the territory in technology development and other areas should add new strength and variety to economic prospects.

The Group will continue to focus on Hong Kong property development and investment, with the objective of sustaining long- term profit growth by increasing its land bank and residential completions, as well as adopting effective cost control measures. The Group also puts great emphasis on its people, providing staff training to achieve higher productivity, greater efficiency and more competitiveness. As we move forward into the new millennium, the Group will take full advantage of new technology, both in its properties and operations. It will further enhance its brand name with added commitments to incorporating the latest technology in its premium products and providing high-quality services. The Group will also consider investing in selective technology projects to capitalize on the benefits of the information age.

The Group pioneered the use of innovative high technology in its new residential properties, keeping pace with the information age.

22 Chairman’s Statement (cont’d)

The Group is optimistic about the long-term prospects for the Hong Kong property market. With its solid financial position and low gearing ratio, the Group is well positioned to take advantage of opportunities for expanding its business in Hong Kong, to maximize the benefits to shareholders. Forthcoming pre-sales in the next several months will include in , Phases 1 of both Ocean Shores and Clearwater Bay Peninsula in Tseung Kwan O and development in Causeway Bay. These pre-sales are expected to further strengthen the Group’s cash flows. Over 90 per cent of the residential units to be completed in the coming financial year have been pre-sold. Barring unforeseen circumstances, the Group’s results for the next year will show satisfactory growth.

Royal Peninsula in Hung Hom was launched for sale at the end of October this year.

Dr Victor Fung and Mr William Kwan were appointed as Independent Non-Executive Directors of the Company in May and July of this year respectively. Their wealth of experience in the commercial sector will benefit the Group’s further business development.

I would also like to take this opportunity to express my gratitude to my fellow directors for their guidance, and to all the staff for their dedication and hard work.

Kwok Ping-sheung, Walter Chairman & Chief Executive

Hong Kong, 7th October 1999 23 Directors’ Report

The directors present their report for the year ended 30th June 1999:

Principal Activities The principal activity of the Company continues to be holding investments in various subsidiaries.

The principal activities of the Group continue to be the development of and investment in properties for sale and rent.

A35 A44 Ancillary and supporting businesses, which are described under subsidiaries on pages A35 to A44, are integrated into the main business of the Group. Turnover and contribution to operating profit from overseas activities are immaterial. A segmented analysis of turnover and contribution to operating profit of the Group (excluding jointly controlled entities and associated companies) is set out below:

Profit before interest expenses, Turnover tax and minority interests 1999 1998 1999 1998

HK$ million HK$ million HK$ million HK$ million

Property sales 14,991 15,304 4,960 8,939 Rental income 5,510 5,650 4,203 4,443 Hotel operation 542 545 134 132 Interest income 543 435 543 434 Other income 2,094 1,288 767 435

Total 23,680 23,222 10,607 14,383

24 Directors’ Report (cont’d)

Group Profits Profit after taxation, including shares of profits of jointly controlled entities and associated companies, amounted to 1998 HK$9,282 million (HK$7,509 million in 1998). After deducting minority interests, profit attributable to shareholders was HK$9,278 million (HK$7,260 million in 1998). 1998

Mr (middle), Chairman and Chief Executive, together with Mr (right) and Mr Raymond Kwok (left), Vice Chairmen and Managing Directors, at the Annual General Meeting.

Dividends 1998 An interim dividend of HK$0.50 per share (1998: HK$0.6) was paid on 15th April 1999. The directors recommend a final dividend of HK$1.05 per share (1998: HK$0.60), making a total 1998 of HK$1.55 per share for the full year ended 30th June 1999 1998 (1998: HK$1.20).

Purchase, Sale or Redemption of Shares The Company did not redeem any of its ordinary shares during the year. Neither the Company nor any of its subsidiaries purchased or sold any of the Company’s ordinary shares during the year.

Share Premium and Reserves Movements in the share premium and reserves of the Company 19 and the Group during the year are shown in note 19 to the financial statements.

25 Directors’ Report (cont’d)

Fixed Assets Movements of fixed assets during the year are shown in note 11 11 to the financial statements.

Group Financial Summary The results, assets and liabilities of the Group for the last five 107 108 years are summarised on pages 107 to 108.

Properties Particulars of major investment properties held by the Group are 58 61 set out on pages 58 to 61.

Directors 4 The list of directors is set out on page 4 of the report and their 109 113 particulars are set out on pages 109 to 113. All directors other than Messrs. Victor Fung Kwok-king and William Kwan Cheuk- yin (together, “New Directors”) who were appointed as Independent Non-Executive Directors on 10th May 1999 and 2nd July 1999 respectively, held office for the whole year. In accordance with 95 Article 95 of the Company’s Articles of Association, the New Directors will retire at the forthcoming Annual General Meeting and, being eligible, will offer themselves for re-election. In 104(A) accordance with Article 104(A) of the Company’s Articles of Association, Messrs. Lee Shau-kee, Woo Po-shing, Walter Kwok Ping-sheung and Thomas Chan Kui-yuen will retire by rotation at the forthcoming Annual General Meeting and, being eligible, will offer themselves for re-election. None of the directors proposed for re-election has a service agreement with the Company or any of its subsidiaries which is not determinable within one year without payment of compensation.

Disclosure of Interests As at 30th June 1999, the interests of the directors and the chief 29 executive of the Company in the equity securities of the Company as recorded in the register required to be kept under Section 29 of the Securities (Disclosure of Interests) Ordinance (the “Ordinance”) were as follows:

26 Directors’ Report (cont’d)

0.5 No. of Shares of HK$0.50 each of the Company in which the Directors were interested

Categories of Interest

Personal Family Corporate Other Name of Director Interest Interest Interest Interest Total

Kwok Ping-sheung, Walter – 3,000 – 1,068,881,522 1,068,884,522 1 (Note 1)

Lee Shau-kee 486,340 ––800,000 1,286,340

Kwok Ping-kwong, Thomas 2,041,281 304,065 – 1,066,931,214 1,069,276,560 1 (Note 1)

Kwok Ping-luen, Raymond – 1,000 – 1,070,074,895 1,070,075,895 1 (Note 1)

Ho Tim 423,941 –––423,941

Woo Po-shing –––––

Fung Kwok-king, Victor –––––

Lo Chiu-chun, Clement 137,273 62,117 ––199,390

Law King-wan 20,000 100,267 ––120,267

Chan Kai-ming 33,000 –––33,000

Chan Kui-yuen, Thomas 126,500 66,000 ––192,500

Kwong Chun 732,722 339,358 ––1,072,080

Wong Yick-kam, Michael 50,904 –––50,904

Wong Chik-wing, Mike 120,999 –––120,999

1 Note 1 Messrs. Walter Kwok Ping-sheung, Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen were deemed (by virtue of the Ordinance) to 1,046,897,347 be interested in the number of shares in the Company shown opposite their names respectively. Of these numbers of shares, 1,046,897,347 shares represent the same interests and are therefore duplicated amongst these three directors.

27 Directors’ Report (cont’d)

Other Associated Corporations As at 30th June 1999, the interests of the directors and the chief 29 executive of the Company in the equity securities of any associated corporation (within the meaning of the Ordinance) as recorded in the register required to be kept under section 29 of the Ordinance were as follows:

(i) (i) Each of Messrs. Walter Kwok Ping-sheung, Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen had the following interests in the equity securities of the following associated corporations:

Associated Corporation No. and Class of Securities Category of Interest 10 Superindo Company Limited 10 ordinary shares Personal 10 Super Fly Company Limited 10 ordinary shares Personal Splendid Kai Limited 2,500 Splendid Kai Limited 2,500 ordinary shares Corporate Hung Carom Company Limited 25 Hung Carom Company Limited 25 ordinary shares Corporate Tinyau Company Limited 1 Tinyau Company Limited 1 ordinary share Corporate 8 Open Step Limited 8 ordinary shares Corporate Globe Image Company Limited 100 Globe Image Company Limited 100 ordinary shares Corporate

(ii) (ii) Messrs. Walter Kwok Ping-sheung and Raymond Kwok Ping-luen had personal interests of 61,522 ordinary shares 61,522 393,350 and 393,350 ordinary shares respectively in the equity security of The Kowloon Motor Bus Holdings Limited.

28 Directors’ Report (cont’d)

(iii) (iii) Messrs. Thomas Kwok Ping-kwong and Raymond Kwok Ping-luen had personal interests of 258,000 ordinary shares 258,000 690,000 and 690,000 ordinary shares respectively in the equity security of SmarTone Telecommunications Holdings Limited.

(iv) (iv) Mr. Lee Shau-kee had other interests in the equity securities of the following associated corporations:

Associated Corporation No. and Class of Securities

Mightypattern Limited 2 200

Mightypattern Limited (Note 2) 200 ordinary shares

2 1

Star Play Development Limited (Note 2) 1 ordinary share

Central Waterfront Property Holdings Limited 2 47.5%

Central Waterfront Property Holdings Limited (Note 2) 47.5% of issued share capital

Newfoundworld Holdings Limited 2 40,000

Newfoundworld Holdings Limited (Note 2) 40,000 ordinary shares

2 1

Topcycle Development Limited (Note 2) 1 ordinary share

2 4,918

Teamfield Property Limited (Note 2) 4,918 ordinary shares

2 Mightypattern Limited Note 2 These shares in Mightypattern Limited and Star Play Development Limited were beneficially owned by Henderson Investment Limited (“HI”).

The respective interests of Henderson Land Development Company Limited (“HL”) and The Hong Kong and China Gas Company Limited (a company in which the subsidiaries of HI owned more than one-third Central Waterfront Property Holdings of its issued shares) in Central Waterfront Property Holdings Limited Limited were 32.5 per cent and 15 per cent respectively.

Newfoundworld Holdings Limited These shares in Newfoundworld Holdings Limited and Topcycle Development Limited were beneficially owned by HL.

These shares in Teamfield Property Limited were held by a company in which HL had a 50 per cent interest. 29 Directors’ Report (cont’d)

Hopkins (Cayman) Mr. Lee Shau-kee beneficially owned all the issued capital of Hopkins Limited Hopkins (Cayman) Limited. Hopkins (Cayman) Limited, as the trustee of a unit (Cayman) Limited trust, owned all the issued ordinary shares which carried the voting rights in the capital of Henderson Development Limited (“HD”). HD was the holding company of HL which was the holding company of HI.

By virtue of the provisions of the Ordinance and the matters aforesaid, Mr. Lee Shau-kee is taken to be interested in the shares and interests as mentioned hereinabove.

(v) Fun Fun World (v) Mr. Victor Fung Kwok-king had corporate interests of 70 Investment Limited ordinary shares in the equity security of Fun Fun World 70 Investment Limited.

(vi) (vi) None of the directors had any interests in any debt securities issued by the Company or any jointly controlled entities and associated corporation.

(vii) (vii) As at 30th June 1999, no rights to subscribe for equity or debt securities of the Company had been granted to any director or the chief executive of the Company or to the spouse or children under 18 years of age of any such director or the chief executive.

Substantial Shareholders As at 30th June 1999, the interests of every person, other than a 16(1) director or the chief executive of the Company, in the equity securities of the Company as recorded in the register required to be kept under Section 16(1) of the Ordinance were as follows:

Name of Shareholder No. of Shares in which the Shareholder was interested HSBC Holdings plc 1,115,632,780 HSBC Finance (Netherlands) 1,114,414,980 HSBC Holdings B.V. 1,114,414,980 HSBC Investment Bank Holdings B.V. 1,091,642,257 HSBC International Trustee Limited 3 (Note 3) 1,065,463,639

30 Directors’ Report (cont’d)

3 HSBC International Trustee Limited Note 3 The shares in which HSBC International Trustee Limited was interested HSBC Investment Bank Holdings formed part of the shares in which HSBC Investment Bank Holdings B.V. HSBC B.V. was interested; the shares in which HSBC Investment Bank Investment Bank Holdings B.V. Holdings B.V. was interested formed part of the shares in which HSBC HSBC Holdings B.V. Holdings B.V. was interested; the shares in which HSBC Holdings B.V. HSBC Holdings B.V. was interested were the shares in which HSBC Finance (Netherlands) HSBC Finance (Netherlands) was interested and the shares in which HSBC Finance (Netherlands) HSBC Finance was interested formed part of the shares in which HSBC Holdings plc (Netherlands) HSBC was interested. Holdings plc

HSBC International Trustee Limited Of the above shares in the Company in which HSBC International Trustee Limited was interested, 1,046,897,347 shares were part of the 1,046,897,347 1 shares referred to in Note 1 above.

Bank Borrowings A26 A29 Details of bank borrowings are set out in notes 17 and 20 to the 17 20 financial statements on pages A26 and A29.

Interest Capitalised Interest capitalised during the year amounted to HK$194 million 1998 (1998: HK$630 million).

Charitable Donations HK$17 million was donated during the year (1998: HK$10.6 1998 million).

Interest in Contracts No contracts of significance to which the Company or any of its subsidiaries was a party and in which a director had a material interest subsisted at the end of the year or at any time during the year.

Arrangement to Purchase Shares or Debentures At no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or of any other body corporate.

31 Directors’ Report (cont’d)

Major Customers and Suppliers During the year, less than 30 per cent of the Group’s sales and less than 30 per cent of the Group’s purchases were attributable to the Group’s five largest customers and five largest suppliers respectively.

Auditors The retiring auditors, Messrs. Deloitte Touche Tohmatsu, have signified their willingness to continue in office. A resolution will be proposed at the Annual General Meeting to re-appoint them and to authorise the directors to fix their remuneration.

Year 2000 Compliance

The Group has long recognised the importance of the Year 2000 issue (Y2K). As previously reported, the Group established a Year 2000 Compliance Programme under the guidance of a Y2K committee to ensure that its business will continue to function properly through and beyond the Year 2000. The Year 2000 conformity requirements issued by the British Standards Institution were adopted as the benchmark for compliance. The Company and its subsidiaries are already fully compliant.

Detailed risk assessments and impact studies on all of the Group’s critical operations have been satisfactorily conducted, and the results were used to develop mitigation and contingent measures to minimise the potential impact of Y2K. All contingency plans have been formulated and will continue to be tested, reviewed and refined as necessary.

The Group has been actively assessing the Y2K compliance of various business counterparts, to ensure that the Group is not unnecessarily exposed to risk due to any third party’s lack of readiness. However, despite its efforts to identify the Y2K issue and to implement appropriate measures, there can be no assurance that equipment or services used by third parties on which the Group does or will rely, will be Y2K compliant, and the failure of such equipment or services may affect the Group’s business operations. 32 Directors’ Report (cont’d)

The total cost incurred to-date for the programme is within the budget of HK$10 million. Any further cost to be incurred in relation to contingency plans will be immaterial.

Costs relating to major system changes which are indirectly related to the Year 2000 are not included above. Costs related to conversion and modification are expended as a revenue item as and when incurred, while costs of new software and replacement of certain systems and equipment will be capitalised and amortised over the useful life of the assets.

Audit Committee Pursuant to the requirements of the Rules Governing the Listing of Securities of the Stock Exchange of Hong Kong Limited, an Audit Committee of the Company was established during the year with reference to “A Guide for the Formation of an Audit Committee” issued by the Hong Kong Society of Accountants. The members of the Audit Committee are Mr. William Kwan Cheuk-yin (Chairman), Mr. Ho Tim and Mr. Clement Lo Chiu- chun, all of whom are non-executive Directors. Subsequent to its formation, the Committee met once in 1999.

The Audit Committee is answerable to the Board and the principal duties of the Committee include the review and supervision of the Company’s financial reporting process and internal controls.

Code of Best Practice The Company has complied with the Code of Best Practice as set out in Appendix 14 of the Listing Rules of The Stock Exchange 14 of Hong Kong Limited during the accounting period covered by this annual report.

This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Board.

Kwok Ping-sheung, Walter Chairman & Chief Executive

Hong Kong, 7th October 1999 33 Directors’ Report (cont’d)

Grand Pacific Views on Castle Peak Road 34 Review of OperationsDirectors’ Report (cont’d)

The superb quality and comprehensive facilities of the Group’s properties, supplemented by caring customer service, have won high acclaim in the market. The Group will build on this foundation, continuing to concentrate on large-scale residential properties with small to 35 medium sized units and high-tech features, to improve residents’ quality of life. Review of Operations

Land Bank

The Group owns a low-cost, well-diversified land bank in Hong Kong. As at the end of the year under review, it consisted of 50.6 million square feet in terms of attributable gross floor area, located throughout , Kowloon and various new towns in the New Territories. In addition, the Group has 21 million square feet of agricultural land in terms of site area, located in various parts of the New Territories. The majority of this is in the process of land use conversion, principally for residential development.

Land Bank in Hong Kong Agricultural Land Reserves

Gross Floor Area Site Area Million Square Feet Million Square Feet 70 25

60 21 20 19 50.9 50.6 50.6 18 18 50 17 44.6 41.3 40 15

30 10

20 18.5 17.3 17.6 15.0 14.1 5 10

0 0 1995 1996 1997 1998 1999 1995 1996 1997 1998 1999 Year Year **

* Not including agricultural land reserves * The Group had 32.1 million square feet of properties under development. About 27.9 million square feet of the properties under development will be sold, while upon completion, the remaining 4.2 million square feet will be added to the Group’s completed investment property portfolio, which now stands at 18.5 million square feet.

Of the properties under development, about 75 per cent are residential projects, and most are large-scale estates of small to medium sized units. The Group will continue to develop premium- quality properties, not only in terms of construction and materials, but also employing the most up-to-date technologies in the facilities and management of its residential and commercial properties. For example, the Group introduced a broad band fibre optic system in Royal Peninsula, Hung Hom. The system enables high-speed 36 ! Land Bank (cont(cont’d)’d)

!"#$%&'()*+,- digital information transmission for the residents, making life much !"#$%& more convenient. Similar broad band facilities will be integrated in other properties under development by the Group.

!"#$%&'()*+,-. The current land bank is sufficient for development needs over !"#$%&'()*+,-. the next five years, and the Group will continue to replenish its !"#$%&'()*+, - land bank on a selective basis. Details of new sites added during !NP !"#$%&'() the year are given in the Chairman’s Statement on page 13. The !"#$"%&'()*UP Group’s land bank in mainland China is described under !" Mainland China Business on page 83.

!"#$%#&'()*+ G * Industrial/Office properties include industrial properties and godowns. 37 Land Bank (cont’d)

The Group’s land bank in Hong Kong, by attributable gross floor area, is analysed by status and usage as follows:

Shopping Industrial/ Status and Usage Residential Centre Office Hotel Office Total million square feet

Development for sale 24.0 – 0.6 – 3.3 27.9

Development for investment – 1.4 0.8 2.0 – 4.2

Completed investment property 1.1 7.4 5.7 0.9 3.4 18.5

Total 25.1 8.8 7.1 2.9 6.7 50.6

The Group’s land bank in Hong Kong, by attributable gross floor area, is analysed by status and location as follows:

Hong Kong New Status and Location Island Kowloon Territories Total million square feet

Development for sale 2.8 3.7 21.4 27.9

Development for investment 0.1 2.0 2.1 4.2

Completed investment property 4.7 5.1 8.7 18.5

Total 7.6 10.8 32.2 50.6 38 Property DevelopmentLand Bank (cont(cont’’d)

The Group will continue to increase the volume of its residential completions in the next few years, while stringently controlling costs to enhance development returns. 39

Mount Haven in Tsing Yi Review of Operations

Property Development

Property Sales The Group’s property sales for the year ended 30th June 1999 were $21,904 million, as compared to HK$25,916 million for the previous year. This figure includes projects in which the Group is both principal and agent and its attributable shares of 22.5 per cent in Villa Esplanada Phase 2, 29 per cent in The Belcher’s Phase 1 and 20 per cent in Tung Chung Crescent.

Projects completed in 1998/99

The Group completed 12 projects in the year ended 30th June 1999, with an aggregate attributable gross floor area of 5 million square feet. These projects are described in the Chairman’s

11 Statement on pages 11 to 12. 12

Residential Shopping Centre Office Total million square feet

For sale 3.4 ** 0.3 3.7

For investment – ** 1.3 1.3

Total 3.4 ** 1.6 5.0

** ** less than 0.1 million square feet

Le Palais in Tai Tam shows the prime quality of the Group’s luxury properties.

40 Property Development (cont’d)(cont’d)

About 95 per cent of the residential properties completed and marketed during the year have been sold, along with 300,000 square feet in Millennium City Phase 1. The remaining floor area in Millennium City Phase 1 and One International Finance Centre will be retained as a long term investment.

Towering over Central, One International Finance Centre offers comprehensive high-tech facilities.

Projects to be completed in 1999/2000

The Group expects to complete eight projects in the coming financial year, with an aggregate attributable gross floor area of 4.4 million square feet. The breakdown is as follows:

Residential Shopping Centre Office Total million square feet

For sale 4.1 – – 4.1

For investment – 0.1 0.2 0.3

Total 4.1 0.1 0.2 4.4

41 Property Development (cont’d)

Properties Under Development 1999/2000 Projects to be Completed in FY1999/2000

Location Project Name

Fung Shing Street, Ngau Chi Wan Scenic View

124 Tsing Yi Town Lot 124 Grand Horizon

Liu To, Tsing Yi Mount Haven

Chung On Terrace, North Point Le Sommet

Ming Yuen Western Street, North Point Villa Claire

Siu Lek Yuen, Shatin Castello

Airport Railway Tung Chung Station Tung Chung Crescent

Development Package One Phase 2

378 378 Kwun Tong Road Millennium City Phase 2

Year Total

Scenic View in Ngau Chi Wan is scheduled for completion by the end of this year.

42 Property Development (cont’d)(cont’d)

Attributable Gross Floor Area in Square Feet

Group’s Interest Residential Shopping Centre Office Total

100% 704,000 – – 704,000

85% 701,000 – – 701,000

100% 653,000 – – 653,000

100% 390,000 – – 390,000

100% 44,000 – – 44,000

100% 1,447,000 11,000 – 1,458,000

20% 166,200 99,000 32,000 297,200

50% – – 133,000 133,000

4,105,200 110,000 165,000 4,380,200

Le Sommet in North Point sets a new level for luxury in an urban area.

43 Property Development (cont’d)

2000/01 Projects to be Completed in FY2000/01

Location Project Name

11084 Kowloon Inland Lot 11084 Royal Peninsula

394 – Town Lot 394 –

Hong Kong Oxygen Plant Redevelopment Clearwater Bay Peninsula

Phase 1

– , Yuen Long –

843 – Shaukeiwan Inland Lot 843, Aldrich Bay –

Ha Yau Tin Phase 2, Yuen Long Villa Premiere

Nga Ying Chau Street, Tsing Yi Villa Esplanada Phase 3

71 – 71 Road –

Shiu Wing Steel Mill Redevelopment Ocean Shores Phase 1

396 Tuen Mun Town Lot 396 Chelsea Heights Phase 2

89 89 Pok Fu Lam Road The Belcher’s Phase 1

401-407 – 401-407 Chatham Road –

– Airport Railway Tung Chung Station –

Development Package One (Hotel Portion)

Year Total

The Aldrich Bay Villa Premiere in residential development Yuen Long will in Shaukeiwan is provide 320 scheduled for completion residential units. in 2001.

44 Property Development (cont’d)(cont’d)

Attributable Gross Floor Area in Square Feet

Group’s Interest Residential Shopping Centre Office Hotel Total

50% 739,000 – – – 739,000

100% 511,000 – – – 511,000

447,000 – – – 447,000

Joint venture

100% 439,500 – – – 439,500

30% 222,000 – – – 222,000

100% 217,000 – – – 217,000

22.5% 193,000 – – – 193,000

100% 14,000 – – – 14,000

49% 667,000 5,500 – – 672,500

100% 551,000 116,000 – – 667,000

29% 323,500 62,500 – – 386,000

100% 23,700 5,900 – – 29,600

20% – – – 47,500 47,500

4,347,700 189,900 – 47,500 4,585,100

Royal Peninsula will be the first residential development in Hong Chelsea Heights Phase 1 Kong to have the broad band fibre in Tuen Mun, is already optic network. occupied, and Phase 2 is now under construction.

45 Property Development (cont’d)

2001/02 2003/04 Major Projects to be Completed in FY2001/02 to FY2003/04

Location Group’s Interest

Ma Wan Development Joint venture

504 Yuen Long Town Lot 504 100%

Shiu Wing Steel Mill Redevelopment 49% Ocean Shores Phases 2 & 3

57 66 Tseung Kwan O Town Lots 57 & 66 57.52% / 25%

374 Tuen Mun Town Lot 374 25%

503 Yuen Long Town Lot 503 (formerly Yau Tin East Road) 100%

Hong Kong Oxygen Plant Redevelopment Clearwater Bay Peninsula Phase 2 Joint venture

8882 IL 8882, Leighton Hill 100%

506 Yuen Long Town Lot 506 66.7%

To Fung Shan Phases 2, 3 and 4, Shatin 100%

Kwu Tung Phases 2 & 3, Sheung Shui 100%

89 89 Pok Fu Lam Road 29%

The Belcher’s Phase 2

Ngau Tam Mei, Yuen Long 100%

399 Tuen Mun Town Lot 399 100%

1 1 Ho Man Tin Hill Road Joint venture

6328 NKIL 6328, Cheung Sha Wan 35.44%

Airport Railway Tung Chung Station Development Package One 20% (Remaining Phases)

418 418 Kwun Tong Road 100%

Olympic Station Development Package Three 100%

Total 46 Property Development (cont’d)(cont’d)

Attributable Gross Floor Area in Square Feet

Residential Shopping Centre Office Hotel Total

3,663,800 86,100 – – 3,749,900

1,366,000 377,000 – – 1,743,000

1,290,000 10,500 – – 1,300,500

1,397,500 195,500 – – 1,593,000

306,500 5,500 – – 312,000

1,162,500 – – – 1,162,500

1,004,000 – – – 1,004,000

898,000 – – – 898,000

664,000 – – – 664,000

744,000 – – – 744,000

405,000 – – – 405,000

386,000 – – – 386,000

383,000 – – – 383,000

375,000 – – – 375,000

158,000 – – – 158,000

414,000 14,000 – 162,000 590,000

203,000 5,500 – – 208,500

– 405,000 678,000 – 1,083,000

– – – 695,400 695,400

14,820,300 1,099,100 678,000 857,400 17,454,800 47 Property Development (cont’d)

Residential

1. 1. Clearwater Bay Peninsula 2. 2. Ocean Shores 3. 57 66 3. TKOTLs 57 & 66 4. 4. Scenic View 5. 5. Castello 6. 394 6. STTL 394 7. 7. To Fung Shan Phase 2, 3 and 4 8. 8. Shek Wu Wai 9. 9. 10. 506 10. YLTL 506 11. 503 11. YLTL 503 12. 504 12. YLTL 504 13. 13. Villa Premiere 14. 14. Shui Pin Wai 15. 399 15. TMTL 399 16. 16. Chelsea Heights Phase 2 17. 374 17. TMTL 374 18. 18. Tung Chung Crescent 19. 19. Ma Wan Development 20. 20. Villa Esplanada Phase 3 21. 21. Grand Horizon 22. 6328 22. NKIL 6328, Cheung Sha Wan 23. 23. 1 Ho Man Tin Hill Road 24. 24. Yunnan Lane, Yau Ma Tei 25. 25. Royal Peninsula 26. 26. The Belcher's 27. 8882 27. IL 8882, Leighton Hill 28. 28. Le Sommet 29. 843 29. SIL 843, Aldrich Bay 15

Shopping Centre 16

2. 2. Ocean Shores 3. 57 66 3. TKOTLs 57 & 66 17 5. 5. Castello 12. 504 12. YLTL 504 16. 16. Cheslsea Heights Phase 2 17. 374 17. TMTL 374 18 18. Airport Railway Tung Chung Station Development Package 1 19. 19. Ma Wan Development 22. 6328 22. NKIL 6328, Cheung Sha Wan 26. 26. The Belcher’s 30. 418 30. 418 Kwun Tong Road

Office

18. 18. Airport Railway Tung Chung Station Development Package 1 30. 418 30. 418 Kwun Tong Road 31. 31. Millennium City Phase 2 32. 129 32. 129 Hoi Bun Road, Kwun Tong

Industrial / Office 39 18

33. 20-22 33. 20-22 Road 34. 12-23 34. 12-23 Wang Wo Tsai Road 35. 51-53 35. 51-53 Kwai Cheong Road Major Existing Highways 36. 77 36. 77 Wing Hong Street 37. 399 37. 399 Chai Wan Road 38. 50 38. 50 Wong Chuk Hang Road Airport Railway

Hotel Mass Transit Railway

22. 6328 22. NKIL 6328, Cheung Sha Wan 39. 39. Airport Railway Tung Chung Station KCRC-West Rail (completion 2003) Development Package 1 40. 40. Airport Railway Olympic Station Development Package 3 MTR Tseung Kwan O Extension (completion 2002) 41. 77 89 41. TWTLs 77 & 89

48 KCRC-East Rail Property Development (cont’d)(cont’d) Major Properties Under Development

8

9

10 14 13 11 12

7 6 33 5

41 34

20 35 21 19 4 36 22

23 40 32 31 24 30 3 2 1 25

29 26 28 27

37 38

49 Property Development (cont’d)

Progress of major projects under development Castello 100% Siu Lek Yuen, Shatin (100% owned) Castello in Shatin consists of seven residential towers containing 1,744 medium sized units with a total gross floor area of over 1.4 million square feet. About 90 per cent of the units have already been sold. The development will be ready for occupation by the end of this year.

Royal Peninsula 11084 ( 50%) Kowloon Inland Lot 11084 (50% owned) Royal Peninsula, with its prime location in urban Kowloon, offers 1,669 luxury residential units and service apartments. It has a total gross floor area of close to 1.5 million square feet, which is expected to be completed in the second half of 2000. The iHON development features the latest information technology with the innovative iHON system, setting new standards for modern digital life. It was launched for sale in October this year.

Ocean Shores 49% Shiu Wing Steel Mill Redevelopment (49% owned) The development has over 5,000 units with a total gross floor area of 4 million square feet, and should be finished in three phases between 2000 and 2002. Construction of the first phase has been progressing according to schedule and should be completed by the end of 2000. There are five residential towers in the first phase containing 1,920 units.

Ocean Shores in Tseung Kwan O has a spectacular harbour view.

50 Property Development (cont’d)(cont’d)

Clearwater Bay Peninsula Hong Kong Oxygen Plant Redevelopment (Joint venture) The development is in two phases; the first comprises three residential towers with a total gross floor area of 447,000 square feet, providing 424 quality units. It is expected to be completed in the first half of 2001. The second phase will have approximately 1,500 small to medium sized units, with total gross floor area exceeding 1 million square feet. It is scheduled for completion in 2002.

Clearwater Bay Peninsula will provide about 2,000 quality residential units.

8882 100% Inland Lot 8882, Leighton Hill (100% owned) This site is strategically located in a well-known prestigious residential area, close to the prime commercial district on Hong Kong Island. The development will contain 898,000 square feet of residential space, providing 558 top-quality luxury units. Construction is expected to finish in the second half of 2001.

The Leighton Hill development in Causeway Bay will be a top grade luxury property.

51 Property Development (cont’d)

Ma Wan (Joint venture) The Group has obtained government approval for an additional 736,000 square feet of floor area, bringing the gross floor area to over 3.7 million square feet. The project’s residential and leisure developments cover almost the entire island. The first phase of the residential development, comprising about 1,700 units, is expected to be completed in 2002.

In addition to a large-scale residential development, the Ma Wan project will also contain a wide variety of leisure facilities.

57 57.52% 66 Tseung Kwan O Town Lots 57 (57.52% owned) & 66 (25% 25% owned) These two sites will be jointly developed as a large-scale project with nine residential towers and a shopping centre, with a combined gross floor area of 2.9 million square feet. Conveniently located next to a station on the future Tseung Kwan O extension of the MTR, the project will provide about 4,000 small to medium sized residential units, to be completed in phases over the next three to four years.

504 100% Yuen Long Town Lot 504 (100% owned) This development has a gross floor area of 1.7 million square feet. The Group plans to build over 2,000 small to medium sized units and a retail podium. Construction will take place in three phases and the whole project is expected to be completed in about four to five years’ time.

52 Property InvestmentProperty Development (cont’d)(cont’d)

As the Group maintains its flexible approach to leasing, its investment property portfolio is 95 per cent let. Gross rental income was slightly affected by the economic downturn. The Group aims to maintain an optimal rental portfolio by developing quality projects for lease.

New Town Plaza in Shatin

53 Review of Operations

Property Investment

Despite another difficult year for the leasing market, performance of the Group’s rental portfolio remained highly satisfactory. Occupancy of the 18.5 million square-foot investment portfolio in Hong Kong remains at 95 per cent. In the year ahead, continuing pressure on rents is anticipated. The Group will monitor the prevailing market and the requirements of its valued tenants closely, to ensure that high occupancy is maintained. The Group will remain flexible towards renewals and new lettings in order to deal with changing market conditions.

In view of the ever-changing market needs, the Group continuously reviews the tenant profile of its shopping centres in order to achieve an optimal mix. It also develops interactive office buildings to meet the advanced communications requirements of modern businesses. The Group’s Millennium City Phase 1, with its advanced facilities, has attracted many communications, computer and service companies as tenants.

Excluding contributions from jointly controlled entities, gross rental income declined by a marginal 2.5 per cent to HK$5,510 million. Net rental income also registered a slight decline of 5.4 per cent to HK$4,203 million. If the Group’s share of rental income from jointly controlled entities was included, total gross rental income would have declined by only one per cent to HK$5,801 million for the year. Net rental income decreased 6.5 per cent to HK$4,284 million. The slight decline was mainly due to fresh contributions from Millennium City Phase 1 and One 54 Property Investment (cont’d)

International Finance Centre, as well as the resilience of the Group’s shopping centres.

While there have been some indications of a gradual economic recovery of late, a full recovery is not yet apparent. Full-year contributions from Millennium City Phase 1 and One International Finance Centre, together with new contributions from Millennium City Phase 2, will help to hold rental income at a satisfactory level in the forthcoming financial year.

The Group’s strategy is to constantly review the mix of its investment portfolio. Investments and divestments are made on a selective basis in order to maintain a well-balanced portfolio and to provide a solid base for long term growth. A major divestment made during the year was the disposal of Lodge on the Park, a luxury residential property consisting of 56 units, located in Mid- Levels.

The Group’s investment property portfolio in Hong Kong, including its attributable share of jointly controlled entities, is as follows:

Shopping Industrial/ Status and Usage Residential Centre Office Hotel Office Total million square feet

Completed 1.1 7.4 5.7 0.9 3.4 18.5

Under Development – 1.4 0.8 2.0 – 4.2

Total 1.1 8.8 6.5 2.9 3.4 22.7

Completed Investment Properties Shopping Centres The Group owns the largest network of regional shopping centres in Hong Kong, with an attributable gross floor area of 7.4 million square feet. The majority of these shopping centres are in new towns, providing daily necessities to nearby residents. Due to their prime locations, occupancies and rents remain relatively resilient to the economic downturn. 55 Property Investment (cont’d)

Despite weakness of the overall retail market, occupancy of the Group’s retail rental portfolio exceeded 95 per cent. Leasing of , one of the Group’s flagship developments, was highly satisfactory with almost full occupancy. Leasing of the Group’s other large shopping centres is also very encouraging. East Point City, and are virtually fully let.

The Group carries out renovations regularly to further improve layout and design, underscoring its commitment to enhancing the rental value of its shopping centres. Promotions and other initiatives are also staged in the Group’s major shopping centres from time to time, to further boost pedestrian flows. During the year under review, New Town Plaza and the shopping centre at Tai Po Centre were renovated. The latter was renamed the as the Group introduced a completely new and inviting “garden feel” food court to the mall.

Offices The Group has an investment portfolio of 5.7 million square feet of prime office space. Over the past two years, the overall office rental market has been affected by over-supply and the territory’s weakened economic situation. However, as the majority of the Group’s office developments are located in prime districts along the main transportation systems, the Group has been able to sustain 94 per cent occupancy. Offices at and Grand Century Place are now virtually fully let, while occupancy of the Sun Hung Kai Centre and Central Plaza, is about 96 per cent.

Substantial progress was made on leasing of the newly-completed One International Finance Centre, with 80 per cent of the office space let. The Group is confident that the building’s take- up rate will continue to rise given its prestigious location in Central and advanced technical facilities.

Residential Properties The Group holds 1.1 million square feet of residential property for investment, a large proportion of which is luxury residences such as Dynasty Court, Pacific View and Hillsborough Court. These deluxe properties provide a comprehensive range of recreational and club house facilities and their occupancy has remained high. 56 Property Investment (cont’d)

Car Parks The Group currently owns 23,000 parking bays. Rental income from these car parks amounted to HK$476 million during the year. More car parks will be built in the Group’s new investment properties.

Others The Group owns 25 cinemas. These cinemas, located in the Group’s various shopping centres, help to attract visitors and bring business to tenants.

A number of industrial and godown properties were also kept for rental purposes, and the Group is actively exploring opportunities to convert some of these sites to residential, service apartment or office use.

Investment properties under development To achieve an optimal mix in its investment property portfolio and further strengthen its recurrent income base, the Group will continue to seek further opportunities for developing prime investment properties in strategic locations. About 4.2 million square feet of new investment properties are under development.

With the success in leasing Millennium City Phase 1, which is now fully let, the Group has recently launched Millennium City Phase 2 for lease. The Group has a 50 per cent interest in this 267,000 square-foot office development.

Major investment properties under development include:

Shopping Centres • Shopping centre at the Airport Railway Tung Chung Station Development Package One • Shopping centre at Chelsea Heights Phase 2 418 • Shopping centre at 418 Kwun Tong Road (Millennium City) 504 • Shopping centre at Yuen Long Town Lot 504

Offices • Millennium City Phase 2 • Offices at the Airport Railway Tung Chung Station Development Package One 418 • Offices at 418 Kwun Tong Road (Millennium City) 57 Property Investment (cont’d)

Major Completed Investment Properties

Property Name Location

Hong Kong Island

30 Sun Hung Kai Centre 30 Harbour Road, Wanchai

280 World Trade Centre 280 Gloucester Road, Causeway Bay

1 One International Finance Centre 1 Harbour View Street, Central

25 Harbour Centre 25 Harbour Road, Wanchai

18 Central Plaza 18 Harbour Road, Wanchai

2 3 23 Dynasty Court (Blocks 2 & 3) 23 Old Peak Road

2 3 38 Pacific View (Blocks 2 & 3) 38 Tai Tam Road

4 18 Hillsborough Court (Block 4) 18 Old Peak Road

Kowloon

193 Grand Century Place 193 Prince Edward Road West, Mongkok

388 Millennium City Phase 1 388 Kwun Tong Road

28 The Sun Arcade 28 Canton Road, Tsim Sha Tsui

193 Royal Plaza Hotel 193 Prince Edward Road West, Mongkok

69 Royal Garden Hotel 69 Mody Road, Tsim Sha Tsui

3 Kerry Hung Kai Godown 3 Fat Tseung Street, Cheung Sha Wan

34 New Tech Plaza 34 Tai Yau Street, San Po Kong

49 APEC Plaza 49 Hoi Yuen Road, Kwun Tong

538 Peninsula Tower 538 Castle Peak Road, Cheung Sha Wan

82-84 Hing Wah Centre 82-84 To Kwa Wan Road

Most of the tenants of Central Plaza in Wanchai, are multinational companies.

58 Property Investment (cont(cont’’d)

Attributable Gross Floor Area in Square Feet

Lease Expiry Group’s Interest Residential Shopping Centre Office Hotel Industrial/Office Total

2127 100% – 53,400 850,600 ––904,000

2842 100% – 162,000 350,000 ––512,000

2047 47.5% – 62,000 373,000 ––435,000

2128 33.3% – 20,500 80,000 ––100,500

2047 50% ––700,000 ––700,000

2886 100% 341,300 ––––341,300

2047 100% 316,700 ––––316,700

2884 100% 159,500 ––––159,500

2047 100% – 725,000 475,000 ––1,200,000

2047 100% ––930,000 ––930,000

2047 100% – 204,800 –– – 204,800

2047 100% –––400,000 – 400,000

2127 100% –––295,000 – 295,000

2047 50% ––––285,000 285,000

2047 100% ––––268,800 268,800

2047 100% 240,000 240,000

2047 100% ––––202,000 202,000

2099 100% ––––182,700 182,700

International Finance Centre’s high-tech design has attracted many international financial institutions.

59 Property Investment (cont’d)

Property Name Location

New Territories

18 New Town Plaza I 18 Street, Shatin

9 Tai Po Mega Mall (formerly Tai 9 On Pong Road, Tai Po Po Centre Shopping Arcade)

5–21 Plaza 5–21 Pak Tin Par Street, Tsuen Wan

East Point City Shopping Centre Chung Wa Road, Tseung Kwan O

2–8 New Town Plaza III 2–8 Shatin Centre Street, Shatin

8 Shopping Centre 8 Long Yat Road, Yuen Long

249–251 Yuen Long Plaza Shopping Arcade 249–251 Castle Peak Road, Yuen Long

9 Uptown Plaza Shopping Arcade 9 Nam Wan Road, Tai Po

1 223 Metroplaza Tower I & Shopping Centre 223 Hing Fong Road,

138 Grand Central Plaza 138 Shatin Rural Committee Road, Shatin

39 39 Lung Sum Avenue, Sheung Shui

1–17 Grand City Plaza 1–17 Sai Lau Kok Road, Tsuen Wan

8 Royal Park Hotel 8 Pak Hok Ting Street, Shatin

8 Sunhing Hung Kai Godown (Shatin) 8 Wong Chuk Yeung Street, Shatin

2 Advanced Technology Centre 2 Choi Fat Street, Sheung Shui

New Town Plaza in Shatin is always bustling Grand Century Place in Mongkok has attracted a large with shoppers. pedestrian flow since opening.

60 Property Investment (cont(cont’’d)

Attributable Gross Floor Area in Square Feet

Lease Expiry Group’s Interest Residential Shopping Centre Office Hotel Industrial/Office Total

2047 100% – 1,300,000 –– – 1,300,000

2047 100% – 588,800 –– – 588,800

2047 100% – 583,000 –– – 583,000

2047 100% – 415,000 –– – 415,000

2047 100% – 350,000 –– – 350,000

2047 87.5% – 245,000 –– – 245,000

2047 100% – 145,000 –– – 145,000

2047 100% – 120,000 –– – 120,000

2047 100% – 600,000 569,000 ––1,169,000

2047 100% – 236,000 505,000 ––741,000

2047 100% – 181,500 375,500 ––557,000

2047 100% – 35,100 137,200 ––172,300

2047 100% –––258,000 – 258,000

2047 100% ––––500,000 500,000

2047 100% ––––142,000 142,000

Metroplaza is the most popular shopping centre in Various events are held at East Point City shopping . centre, which attract a large number of visitors.

61 Property Investment (cont’d)

Residential

1. 1. Dynasty Court 2. 2. Hillsborough Court 3. 3. The Harbourview 4. 3 4. 3 Repulse Bay Road 5. 63 5. 63 Deep Water Bay Road 6. 51 55 6. 51 & 55 Deep Water Bay Road 7. 7. Pacific View

Shopping Centre

8. 8. New Town Plaza 9. 9. Grand Central Plaza 10. 10. Shatin Shopping Arcade 11. 11. East Point City 12. 12. Uptown Plaza 13. 13. Tai Po Mega Mall 14 14. Landmark North 15. 15. Sun Yuen Long Centre 16. 16. Yuen Long Landmark 17. 17. Transport Plaza 18. 18. Yuen Long Plaza 19. 19. Chi Lok Fa Yuen 20. 20. 21. 21. Grand City Plaza 22. 22. Metroplaza 23. 23. New Kowloon Plaza 24. 24. Grand Century Place 25. 25. Hollywood Plaza 26. 26. The Sun Arcade 27. 27. World Trade Centre 28. 28. Sun Hung Kai Centre 29. 29. Harbour Centre 30. 30. One International Finance Centre 19 31. 31 Chi Fu Landmark 32. 32. Port Centre 33. 33. New Jade Garden

Office

8. 8. New Town Tower 9. 9. Grand Central Plaza 14. 14. Landmark North 16. 16. Yuen Long Landmark 17. 17. Transport Plaza 21 21. Grand City Plaza 22. 22. Metroplaza 24. 24. Grand Century Place 25. 25. Hollywood Plaza 27. 27. World Trade Centre 28. 28. Sun Hung Kai Centre 29. 29. Harbour Centre 30. 30. One International Finance Centre 34. 34. Central Plaza 35. 35. Millenium City Phase 1

Industrial / Office

36. 36. APEC Plaza 37. 37. Infotech Centre Major Existing Highways 38. 38. Hing Wah Centre 39. 39. New Tech Plaza 40. 40. Advanced Technology Centre Airport Railway 41. 41. Peninsula Tower 42. 42. Kerry Hung Kai Godown 43. 43. Sunhing Hung Kai Godown (Shatin) Mass Transit Railway

Hotel KCRC-West Rail (completion 2003)

44. 44. Royal Garden Hotel MTR Tseung Kwan O Extension (completion 2002) 45. 45. Royal Park Hotel 46. 46. Royal Plaza Hotel

62 KCRC-East Rail Property Investment (cont(cont’’d) Major Completed Investment Properties

40 14

13 18 16 15 12 17

43

9 45 8 10 21 20

22

41

42 46 38 23 24 39 25 37 35 36 11

26 44

30 27 34 29 28

2 33 1 3 31 32 4

5 7 6

63 Review of Operations

Related Business Activities

Hotels As the economic downturn in most of Asia appears to have been over, occupancy of the Group’s three hotels improved during the year under review, while average room rate stabilized in recent months after a significant decline. With signs of a recovery on the way, tourist arrivals are growing and prospects for the hotel industry are improving.

The Royal Garden Hotel focused on improving efficiency and reducing costs during the year under review, resulting in a leaner, more streamlined operation. Occupancy averaged 85 per cent for the year, up over the previous year and in line with the planned target. For the future, planned renovations to guest rooms and public areas, along with an aggressive promotion programmes, will further enhance the Royal Garden’s prospects, carrying it through the coming year with renewed confidence.

The Royal Park Hotel registered an average occupancy of 86 per cent during the year. This encouraging result demonstrates that the Royal Park has a strong foundation and a steadily growing client base. With the advantages of easy access to Hong Kong’s new International Airport and a prime location near the railway station, the Royal Park offers unrivalled convenience, and the hotel is confident of maintaining high occupancy rates.

The Royal Plaza Hotel’s occupancy rate grew steadily since its opening.

Occupancy in the Royal Plaza Hotel has increased steadily since its opening in 1997. Despite the negative economic climate in the

64 Related Business Activities (cont(cont’’d)

latter part of 1998 and the beginning of 1999, the Royal Plaza achieved an average occupancy rate of 80 per cent during the year. With increasing signs of an economic revival in Southeast Asia and the advent of the next millennium, the business outlook will further improve.

Construction The total turnover of the construction division more than doubled in the year under review from last year’s HK$5.2 billion to HK$13 billion, of which HK$1.3 billion was derived from joint venture companies. Over the year, 11 million square feet of covered floor area was completed, of which one million square feet was completed by a joint venture company.

Major projects completed during the year include Symphony Bay in Sai Kung, Le Palais in Tai Tam, Grand Pacific Views & Grand Pacific Heights on Castle Peak Road, Waterfront South in Aberdeen, in Kowloon Tong, the Airport Freight Forwarding Centre and Millennium City Phase 1 in East Kowloon. One International Finance Centre was the only project completed by a joint venture company in the year.

Symphony Bay in Sai Kung (left) and Grand Pacific Heights on Castle Peak Road (above) were both completed in the year under review.

65 Related Business Activities (cont(cont’’d)

Projects currently under construction include Ocean Shores in Tseung Kwan O, Grand Horizon in Tsing Yi, Castello in Shatin, Le Sommet in North Point, Scenic View in Ngau Chi Wan, Villa Premiere in Yuen Long and Chelsea Heights Phase 2 in Tuen Mun. Projects under development by joint venture companies include Royal Peninsula in Hung Hom and The Belcher’s in Mid- Levels West.

The Belcher's incorporates the finest design and materials, and is equipped with high-tech facilities, winning market acclaim.

With the difficult economic climate in the year under review, the division adopted new construction methods to increase efficiency, while implementing numerous improvements to interior finishing procedures to ensure continued high quality. To further raise its competitive advantage, the division is enhancing and integrating its various information systems to provide effective decision support and cost control information, thereby strengthening the construction division’s operations.

66 Related Business Activities (cont(cont’’d)

The following wholly owned subsidiaries and associates provide fire prevention, electrical engineering, machinery leasing and ready-mixed concrete, complementing the construction division’s activities:

Everlight Engineering Company Limited provides electrical and fire prevention systems, including installation and system maintenance, for in-house and external projects. Turnover for the year under review was HK$415 million, including HK$122 million from external projects, an increase of 74 per cent over the previous year.

Aegis Engineering Company Limited provides plant and machinery leasing, and site office equipment to the Group. Turnover for the year under review was HK$48 million.

Glorious Concrete (HK) Limited is an associate of the division, supplying ready-mixed concrete to the Group and many external contractors. The company’s results for the year were good.

The construction division strives to improve the quality of its projects, in order to ensure that the Group’s properties are of the highest standard.

67 Related Business Activities (cont(cont’’d)

Financial Services Hung Kai Finance Company Limited, Honour Securities Company Limited, Honour Finance Company Limited and Honour Futures Limited, make up the financial services division, providing home mortgages, share margin financing, stock and futures broking, consumer loans and deposit-taking.

The economic downturn following the Asian financial turmoil continued to affect Hong Kong’s economy during the year under review. In light of this, the operating environment was difficult and the overall profitability of the financial services division recorded a year-on-year decline. The division’s principal objective was to maintain a prudent and conservative lending policy together with effective credit control in mortgage financing and consumer loans.

Having seen stabilised interest rates and signs of improving domestic consumption, the division believes Hong Kong’s economic position will return to more normal levels, and looks forward to satisfactory growth in the year ahead.

Insurance Sun Hung Kai Properties Insurance Limited had a business turnover of HK$167 million, and recorded a pre-tax profit of HK$40.5 million for the year under review. Since its establishment, the company has provided quality products and services to its clients. It recently launched a new line of personal insurance products for direct and Internet sale to meet growing customer needs.

Property Management The Group’s property management division aims to better the quality of life for residents of the Group’s properties, with premium quality service and innovative concepts for care-free living. In addition to maintaining the highest professional standards, the Group’s property management subsidiaries are cost-efficient, ensuring that their services provide value for

68 Related Business Activities (cont(cont’’d)

money. The subsidiaries’ core businesses include property management, sales and leasing, cleaning and security services and club management. The property management division now manages 95 million square feet of residential premises, 17 million square feet of commercial space and 29 million square feet of industrial space.

Hong Yip Service Company Limited is one of the largest property management companies in Hong Kong. Committed to quality service and customer satisfaction, Hong Yip has established a solid reputation in the territory, which is best evidenced by its winning the “Hong Kong Housing Authority Best Property Management Agent Award” for six consecutive years, and management contracts from other developers and Owners’ Incorporations.

1999 was another fruitful year for Hong Yip. It won a number of honors for its outstanding performance in cleaning, environmental protection and fire prevention. A number of the company’s front- line security guards also won commendations from the Hong Kong Police. To further improve residents’ quality of life, Hong Yip introduced Privilege Home Services much to residents’ appreciation. As part of the services offered, Hong Yip was the first property management company in Hong Kong to secure a franchise to sell stamps. Other value-added services included more than 80 activities organized this summer.

Hong Yip believes in the importance of quality staff. The company participates in the Government’s Employee Training Programme. In-house training programmes were also organized for all levels of staff. The “Service Excellence” training program and the “Fire Safety Ambassador” training program co-organized with the Fire Services Department, were the focus for 1999, with full participation.

Hong Yip is the first Hong Kong property management company to use remote building services monitoring systems. To keep pace with technological development over the coming year, Hong Yip will be upgrading its systems using the internet technology. It will be one of the major tasks in the coming year. 69 Related Business Activities (cont(cont’’d)

Kai Shing Management Services Limited has made continuous up-grading its prime objective and is the first Hong Kong ISO9002 ISO14001 property management company awarded ISO9002 and ISO14001 certification. In March 1999 Kai Shing broadened its operations to offer household services and private club management in addition to managing residential, commercial and institutional properties. The company has installed state-of-the-art information management and security systems to enhance efficiency. Kai Shing’s core business remains property management, including sales and leasing, cleaning, security and club management.

Kai Shing expanded its property management operations in mainland China in 1999, through its subsidiary Shanghai Kai Shing Property Management Services, which began managing the retail and office space of Shanghai Central Plaza, and Arcadia Shanghai with two blocks of service apartments.

In the year under review, Kai Shing won a number of honours for its quality management. The company won the Gold Medal and a prize for the greatest improvement in a territory-wide cleaning competition held by the Housing Authority.

Kai Shing also won awards for security, including commendations from the Sau Mau Ping and Islands West District police for the outstanding performance of a number of its security guards.

Hong Yip and Kai Shing won several grand prizes in a territory-wide cleaning competition.

70 Infrastructure andRelated BusinessTransportation Activities (cont(cont’’d)

SmarTone Telecommunications The Group's investments in telecommunications and other infrastructure projects are all in 71 Hong Kong. They are low risk in nature and provide the Group with growing recurrent income over the long term. Review of Operations

Infrastructure and Transportation

Projects In Operation Projects Under Construction/Planning

1 1

2 2

3

4

5

6

1

1

2 2 6 4 3 5

Telecommunications SmarTone Telecommunications Holdings Limited forged a strategic alliance in May 1999 with British Telecommunications plc (BT). Following the purchase of a 20 per cent interest of the company’s enlarged share capital for approximately HK$3 billion, BT became the second largest shareholder in SmarTone. The Group remains SmarTone’s largest shareholder with an equity holding of about 26 per cent.

The alliance has enhanced SmarTone’s competitiveness and contributed to the company’s long-term growth and prosperity. SmarTone has been further strengthened, in terms of technological

72 Infrastructure and Transportation (cont(cont’’d)

capabilities and its financial position, especially for regional expansion and diversification into related fields in the telecommunications industry.

In line with its long-term business plan, SmarTone carried out a series of corporate initiatives to expand its business and transform the company into a diversified communications company. In the iSm@rt first half of 1999, SmarTone introduced its competitive Internet Anytime1638 service, iSm@rt, and IDD service, Anytime 1638. These services have been very well received by customers.

For the year ended 30th June 1999, SmarTone reported an after- tax profit of HK$604 million, a decrease of 41 per cent from the previous year. During the period under review, the company continued to expand its customer base to around 618,000 compared to 523,000 in June 1998.

The introduction of Mobile Number Portability in March 1999 fuelled the already fierce competition in the cellular sector. Operators gave heavy handset subsidies and aggressive tariff plans to get market share, which had a negative impact on profit margins for the whole industry.

The year under review saw SmarTone continue with its front- running role in the industry, particularly in the areas of value- added services and technological advancement. In February 1999, SmarTone became the first mobile operator in Hong Kong to launch a mobile securities trading service, SmarTrade. In April 1999, the Group and SmarTone teamed up to offer “Smart Living” to SHKP residents, the first mobile phone property information service in Hong Kong.

In collaboration with its long-term business partner Ericsson, SmarTone was also the first in to conduct field trials for “Wideband Code Division Multiple Access” (WCDMA), a third generation mobile communications system currently under

73 Infrastructure and Transportation (cont’d)

development. SmarTone and Ericsson subsequently broke new ground in unveiling the various possibilities of WCDMA in July 1999 by demonstrating on-the-move video conferencing, image transmission and web-browsing.

SmarTone looks to the future with much enthusiasm and confidence. The convergence of mobile communications and the Internet, and the introduction of new technology will offer significant growth potential. The strong commitment from the Group and other major shareholders will continue to benefit the company in its pursuit of new technology and business development opportunities in the region.

Franchised Bus Operation The Kowloon Motor Bus Holdings Limited, in which the Group has a 33 per cent interest, is a publicly-listed company in Hong Kong. As the largest passenger carrier in Hong Kong, its main business is providing franchised bus services covering Kowloon and the New Territories. The company reported a net profit of HK$585 million for the year ended 31st December 1998, an increase of 6.3 per cent compared to the previous year. For the six months ended 30th June 1999, the company reported a net profit of HK$301 million, 4.6 per cent higher than last year. The company will continue to improve its services by adopting new technology and replacing older buses with new air-conditioned ones. The company has successfully diversified into the non- franchised bus business through Sun Bus Limited which had become profitable during the year.

Toll Road The Group holds a 50 per cent interest in the Route 3 (Country Park Section) which is a 10.1-kilometre dual three-lane expressway running from in the south to , in Yuen Long, in the north. It consists of the 3.8-kilometre Tai Lam Tunnel and the 6.3-kilometre Yuen Long Approach Road.

Since Route 3 (Country Park Section) opened to the public in May 1998, it has provided a quick and direct link between the 74 northern New Territories and major urban areas as well as the Infrastructure and Transportation (cont(cont’’d)

new airport. It has alleviated traffic congestion along the Tuen Mun and Tolo highways, and improved cross-border traffic by offering the most efficient route for goods vehicles travelling from the border to the container terminal in Kwai Chung. The flow of traffic has been increasing steadily since Route 3 (Country Park Section) opened.

Traffic on the Route 3 (Country Park Section) has increased steadily since the toll road opened.

Transport Infrastructure Management The Wilson Group was established in July 1998 to oversee a variety of transport related businesses. Wilson Parking (Hong Kong) Limited, a subsidiary of the group, is the largest car park operator in Hong Kong. Together with Mack & Company Carpark Management Limited, which it acquired in October 1997, it provides high-quality management for 220 car parks containing over 57,000 parking bays.

The Wilson Group owns China Tollways Limited, which has been successfully managing and maintaining the and Tseung Kwan O tunnels under government contract since April 1996. Wilson has a 66.67 per cent stake in Tsing Ma Management Limited, which has been operating and maintaining the , including the , since 1997, and it 75 Infrastructure and Transportation (cont’d)

owns Wilson Tunnel Management, which operates and maintains the Route 3 (Country Park Section) since its opening in May 1998.

Hong Kong Parking Limited is 50 per cent owned by the Wilson Group. It won the government contract to manage and maintain all 17,000 parking meters in Hong Kong, beginning in September 1997. The company was also awarded the contract to convert all mechanical parking meters to smart card operated electronic ones by early 1999.

The Wilson Group owns 25 per cent of Autotoll Limited, a joint- venture electronic toll collector and central clearing house for all ten toll tunnels and expressways in Hong Kong. Autotoll began operations in October 1998.

Parking Other companies owned by the Wilson Group include Parking Systems Limited Systems Limited, which sells and services parking-related equipment, and SkiData Parking Systems Limited, a joint-venture SkiData AG with SkiData AG of Austria, which is the exclusive distributor of SkiData Parking Systems Limited SkiData parking equipment in Hong Kong, mainland China, SkiData Australia, New Zealand and Singapore.

The Wilson Group has a 30 per cent interest in the Hong Kong School of Motoring. The school has been operating successfully for the past 16 years as the only provider of off-street driver training in Hong Kong. It currently has three centres, in Shatin, Wong Chuk Hang and Yuen Long.

The operations of Wilson Parking, China Tollways, Tsing Ma Management, Hong Kong Parking and the Hong Kong School of ISO Motoring have all been given ISO certification. The Wilson Group employs about 4,000 staff, and all of its companies maintained a satisfactory level of profit during the year under review.

76 Infrastructure and Transportation (cont(cont’’d)

Port Business The Group owns 33 per cent of the River Trade Terminal, which occupies a 65-hectare site in Tuen Mun. It provides a full range of containerized and breakbulk cargo handling and storage services for river trade and related vessels. The first phase operating area opened in October 1998, and construction of the entire project is expected to be completed by the end of 1999. On completion, the terminal will be the largest and most modernized river trade terminal in Hong Kong with 3,000 metres of quayfront and 60 berths.

Construction of the entire River Trade Terminal project will be completed by the end of 1999.

Asia Container Terminals Limited, in which the Group has a 28.5 per cent interest, participates in the development of 6 berths at Container Terminal 9 on Tsing Yi Island jointly with two other developers. Upon completion, it will exchange its two berths at Container Terminal 9 for two existing berths at Container Terminal 8. The joint developers signed the Land Grant with the Government in December 1998. Construction design and project financing are progressing smoothly. Construction of the project is scheduled to begin in early 2000 and is expected to be completed in 2004.

The Group also holds a 50 per cent interests in both Hoi Kong Container Services Company Limited and Faith & Safe Transportation Company Limited, two of the major market leaders in the mid-stream industry in Hong Kong. Business during the year was satisfactory. 77 Infrastructure and Transportation (cont’d)

Airport Freight Forwarding Centre Airport Freight Forwarding Centre Company Limited (AFFC) is a consortium in which the Group holds a 65 per cent interest. The AFFC comprises 1.3 million square feet of cargo handling space and 175,000 square feet of office space. The AFFC’s primary business is air cargo storage and handling, but it has expanded its services to the air freight industry through a wholly- owned subsidiary, Airport Cargo Logistics Services Limited. It provides customized logistics services at affordable rates, using sophisticated facilities, the latest technology and a skilled work force. Services include trucking, storage, consolidation, palletization and logistics management. Logistics is the fastest- growing sector of the transportation business, and Airport Cargo Logistics Services is continuously investing more resources in its supply chain management system to meet the growing needs of the market.

Airport Freight Forwarding Centre

Hong Kong Business Aviation Centre Hong Kong Business Aviation Centre Limited is 35 per cent owned by the Group. Its major facilities include an executive terminal, hangar, aircraft and avionics service bays, refuelling equipment, a maintenance base, weather and flight briefing room and a business centre for travellers, making it the first of its kind in the region. The opening of the new airport’s second runway is expected to substantially increase the number of business aircraft visiting Hong Kong. The Hong Kong Business Aviation Centre

78 Infrastructure and Transportation (cont(cont’’d)

has handled all types of aircraft, from eight-seaters to a converted Boeing 747 SP. The centre was formally opened in September 747 SP 1999.

Landfill and Refuse Transfer Station The Group has a 20 per cent interest in Green Valley Landfill Limited, South China WMI Transfer Limited and Pearl Delta WMI Limited.

Green Valley Landfill was awarded a government contract for the design, construction, operation and long term aftercare of the South East New Territories (SENT) landfill, in August 1993, and the company has been in operation since September 1994. Its operational life is 15 years and the aftercare period is 30 years from its closure.

The SENT landfill occupies a 100-hectare site in Tseung Kwan O. It has a capacity of 40 million cubic metres and can handle 10,000 tonnes of refuse each day. The landfill processes municipal, construction and chemical waste.

South China WMI Transfer was awarded a government contract for the design, construction and operation of the Transfer Station (WKTS) in December 1995, and has been in operation since May 1997.

The transfer station is in the West Kowloon reclamation area on a two-hectare site. Its catchment area is West Kowloon, Tsuen Wan, Tsing Yi and Kwai Chung. WKTS is Hong Kong’s largest refuse transfer station, with a handling capacity of 2,875 tonnes per day.

Pearl Delta WMI handles waste at the Hong Kong International Airport at , and has been in operation since July 1998.

79 Review of Operations

Other Investment Holdings

Thomas Cook Hung Kai Currency Exchange Limited, the Group’s 25 per cent joint venture with the Thomas Cook Group, is the exclusive operator of twelve foreign exchange outlets at the Hong Kong International Airport at Chek Lap Kok. The company deals in more than thirty two major and minor foreign currencies.

Alliance Capital New-Alliance Asset Management (Asia) Limited is a 50/50 Management LP joint venture between the Group and Alliance Capital Management LP. Established in 1997, the company provides a broad range of asset management services to both individual and institutional clients in Hong Kong. During the period under review, New- Alliance further widened its product range, strengthened its distribution network and enhanced its market position. Going forward, the company will continue to capitalize on the solid foundations established over the past two years and the strengths of its shareholders, to expand its business in the asset management industry of Hong Kong.

USI Holdings Limited, a publicly-listed company in which the Group owns a 19 per cent interest, is engaged in garment manufacturing and trading, property development and telecommunications. The company registered a net loss of HK$78.1 million for the year ended 31st December 1998, after exceptional losses of HK$141.4 million. The majority of the exceptional loss was attributed to provisions for its property projects under development. For the first six months of 1999, the company recorded a profit of HK$7.6 million, compared to HK$18.0 million for the previous year.

80 Mainland ChinaReview ofBusiness Operations

Sun Dong An Plaza in Beijing 81 The Group will continue with its prudent and selective policy towards investing in mainland China. It will focus on property projects in Beijing, Shanghai and Guangzhou, taking a long- term view and retaining most developments for rent. ! Review of Operations

! Mainland China Business

 Beijing

 Shanghai

 Guangzhou

!"#$%&'()*+,- The Group continues its prudent policy and focused approach to !"#$%&'()*+,- investing in mainland China. Investments in the mainland !"#$%&'()*+,- concentrate on property development and investment, and will be !"#$%&'()*+,- limited to less than 10 per cent of the Group’s total assets. The !"#$%&'"()*+,- Group’s current commitments in the mainland are approximately two per cent of its assets.

!"#$%&'()*+,- The majority of the Group’s developments are in prime locations !"#$%&'()*+,- in Beijing, Shanghai and Guangzhou. The Group currently holds

82 Mainland China Business (cont’d)(cont’d)

2.3 million square feet of properties in the mainland, 74 per cent of which is completed properties held as a long-term investment.

The Shanghai Central Plaza shopping centre opened in August this year and is now 90 per cent let.

The Group’s land bank in mainland China, by attributable gross floor area, is summarized as follows:

Residential Shopping Centre Office Total

million square feet

Properties Under Development

Shanghai 0.1 ––0.1

Guangzhou 0.5 ** – 0.5

Subtotal 0.6 ** – 0.6

Completed Investment Properties

Beijing – 0.8 0.2 1.0

Shanghai 0.4 0.1 0.2 0.7

Subtotal 0.4 0.9 0.4 1.7

Total 1.0 0.9 0.4 2.3

** 83 ** Less than 0.1 million square feet Mainland China Business (cont’d)

Completed Investment Properties

Sun Dong An Plaza in Beijing is 50 per cent owned by the Group. The redevelopment programme for Wangfujing Street was recently completed, further boosting pedestrian flow to the 1.3 million square-foot shopping centre. Leasing of the 430,000 square feet of office space is encouraging with 80 per cent of the lettable area already let.

During the year under review, the Group completed Shanghai Central Plaza and the first phase of Arcadia Shanghai. Leasing of both properties has begun. The shopping centre at Shanghai Central Plaza opened in August this year is now 90 per cent let.

Properties Under Development

Major projects under development are as follows:

Shanghai Arcadia Shanghai 88 66.5% 88 Guang Yuan Xi Road, Xu Hui (66.5% owned) The first phase of the development was completed during the year under review, and construction of the second phase is underway. It has a gross floor area of 136,000 square feet, providing 132 residential units.

Guangzhou Glorious City Garden 858 30% 858 Dongfeng Road East (30% owned) The development consists of three phases. The first phase was completed and sold in 1997. The second phase of the 1.2 million square-foot residential project is expected to be completed in the current financial year. The five residential towers will provide 892 quality units. More than 600 units have already been put on the market, and almost all of them have been pre-sold. Planning for the third phase is still underway.

84 Review of Operations

Group Finance

The Group has always adhered to its conservative operating and financial management policies. It has expanded its network of relationship banks. All of its borrowings are unsecured. The Group has substantial undrawn committed facilities, more than sufficient to meet its funding requirements.

In line with its policy of diversifying its sources of funding and lengthening its debt maturity profile, the Group has issued several notes during the year both domestically and in the international capital market. The Group will continue with its conservative management of foreign exchange and interest rate risks. The vast majority of its borrowings were in Hong Kong dollars and no derivative products were taken.

In February 1999 the Group established a Euro Medium Term Note programme (EMTN), as a quick and efficient mechanism for raising debt financing in the domestic and international capital markets. This was the first for a Hong Kong listed company. The programme has a credit rating identical to the Group’s foreign currency rating and the Hong Kong Government’s sovereign debt rating.

Credit Ratings Foreign currency Local currency Moody’sA3A2 Standard & Poor’sA A+

Since the beginning of 1999, the Group has issued HK$3.4 billion worth of two to five years fixed rate Hong Kong dollar notes, and a US$90 million seven years floating rate note. The Hong Kong dollar funds were used to repay the Group’s ¥32 billion Samurai Bond due in June 1999 and to repay short-term loans, while the US dollar proceeds went to refinance US dollar loans for projects in the mainland.

It has always been the Group’s strategy to maintain a low gearing and high interest coverage position. As at 30th June 1999, the Group’s ratio of net debt to shareholders’ fund was 12.0 per cent (1998: 17.8 per cent), and for the year under review, its profit before interest, tax and exceptional items was able to cover gross interest expenses 5.4 times (1998: 5.6 times).

85 Review of Operations

Investor Relations

Investor relations is one of the Group’s top priorities, demonstrating its commitment to transparency, openness and an investor-friendly environment. The Group employs a variety of channels to disseminate corporate information, including presentations, press releases, regular publications and the Internet.

The Group organizes individual meetings with investors and analysts to discuss corporate strategy and investor concerns including small group discussions after result announcements. In the year under review, the Group had numerous meetings with investors and participated in various conferences and presentations, including the Credit Suisse First Boston Asian Investment Conference and the Credit Lyonnais Investors’ Forum. Senior management went on a road show to meet equity investors in the US and Europe during November 1998, and visited fixed-income investors in Europe with the launch of the Group’s Euro Medium Term Note programme in February 1999.

Publications such as annual reports, quarterly magazines and newsletters are distributed to local and overseas investors, analysts, banks and the news media. Important corporate events are publicized through press releases. All of these information http:// and the newest corporate developments are also available on the www.shkp.com.hk Group’s Internet web site at http://www.shkp.com.hk.

The Group has been acclaimed by a number of international Asiamoney financial magazines. It was recently voted Number One among Asiamoney’s Best Managed Companies of the Decade, and Asian Business named one of Asia’s Most Admired Companies by Asian Business. These awards demonstrate the quality of the Group’s management, its corporate strategy and its relations with the investment community.

86 Customer Service

Providing the highest level of service is one of the Group's top priorities, and its property management subsidiaries use constant training to fulfil their commitment to offering residents the finest care.

Estate Management Review of Operations

Customer Service

The Group strives to offer customers the best after-sales service and support as part of its commitment to building quality properties and providing a new standard of customer care. It will continue to monitor changes in the market through different channels, with an emphasis on two-way communication with customers, to supply the best service.

Membership in the SHKP Club has grown significantly to 95,000, and in September 1999, the Club upgraded the Citibank VISA SHKP Club VISA Card with the most advanced technology. It is now the world’s first commercial multifunction Smart Card using Visa Open Platform the Visa Open Platform to incorporate four functions in one card, including privileges in SHKP shopping malls, multiple residential services, SHKP Club members’ privileges and banking services. The new Card has opened up a new era in modern electronic living. Enthusiastic response was received.

The Group’s Internet web site has been totally redesigned, with a more streamlined structure and layout, faster download time and Home.net more interactive functions. There is now Home.net and an on-line Quamnet Chinese Almanac, and the Group also joined with Quamnet to provide free real-time stock price quotations. One of the original features, the Forum, is unique for a local developer’s web site. It meets the great demand for a channel of free expression, as shown by the rapidly growing volume of incoming messages.

To further enhance the quality of customer service in its shopping malls, the Group established Customer Care Centres staffed by Customer Care Ambassadors in several malls during the year under review. To deliver the best service, Ambassadors do more than simply answering customer enquiries, they take an active role communicating with customers to service to their needs. There are now Customer Care Centres and Customer Service Ambassadors in East Point City, Grand Century Place, New Town Plaza, Metroplaza and the World Trade Centre. Since the idea is so popular, the Group is planning to extend this service to more of its shopping centres. 88 Customer Service (cont’d)(cont’d)

The Group pioneered the use of multi-purpose Smart Card Systems, Internet booking of club house facilities and Home.net, all of which are popular with residents. In the year under review, The Belcher’s unveiled the interactive communication system “Smart Living” and Royal Peninsula introduced the first iHON (intelligent Home Optical-fibre Network) in Hong Kong, carrying a diverse range of information into residents’ homes.

In addition to the usual services one would expect from a management company, such as security, general cleaning and maintenance, the Group’s management subsidiaries introduced Privilege Home Services catering the needs of residents in the year under review. Residents appreciate the service highly, so it has been expanded, with Home Service Ambassadors to help residents take advantage of all the services on offer. The management companies also organize inter-estate social events to promote a sense of community, and the work of the Property Liaison Team in facilitating the handover of units and providing quality after-sales service has been widely praised by owners.

The Group’s residential properties and shopping centres always provide the best customer service.

89 Review of Operations

Environmental Protection and Promotion

The Group is concerned about the environment, and it strives to promote green management in its estates to increase people’s awareness of environmental issues. The Group also implements environmental protection measures in its commercial and industrial properties to provide more pleasant work places. This excellence in promoting environmental protection won the Group a number of awards during the year under review.

Residential properties developed by the Group in recent years include large outdoor green spaces with landscaping designed by gardening specialists, and seasonal flowers and trees are planted, providing a pleasant, natural environment for residents. Meanwhile, strict environmental protection measures are implemented in the construction sites in order to minimize the possibility of pollution.

There are plant nurseries and family gardens in several estates, giving residents more chance to enjoy a green lifestyle. Palm Springs for example, features an organic farm where residents can grow chemical-free organic vegetables, which is good for both the environment and residents’ health.

Kai Shing and Hong Yip, the Group’s property management subsidiaries, actively promote environmental protection, carefully implementing the Group’s green management policies. The two companies also organize various green events, including poster design, slogan and household waste recycling contests, Garden Farm visits, waste-to-handicraft classes, and an annual inter-estate green carnival. All these activities help to increase residents’ awareness of the need to protect the environment, and so the management companies’ green initiatives gain residents’ support.

Kai Shing and Hong Yip took part in a territory-wide cleaning competition held by the Housing Authority during the year under review, and both achieved outstanding results, winners of the gold medal, badges of merit and the prize for greatest improvement.

90 Environmental Protection and Promotion (cont(cont’’d)d)

The Group’s estates also won a number of prizes in the Waste Paper and Aluminium Can Recycling Competition held by the Environmental Protection Committee. Wonderland Villa won four major prizes in the second phase, including the Five Star Green Estate prize, Champions of the waste paper section and the waste paper section for private estates, first runner-up in the aluminium can section. Another property, Uptown Plaza, was the second runner-up in the waste paper section.

The Group has also achieved remarkable results in improving the environment of its commercial properties. In the year under review, the Group’s headquarters, the Sun Hung Kai Centre, was given a Certificate of Assessment rated Excellent by the Centre of Environmental Technology (CET). To date, there are only six completed properties in Hong Kong that have qualified for the Excellent rating, and the CET praised the Sun Hung Kai Centre for setting a high standard for others to follow.

Following the Hong Kong Building Environmental Assessment Method devised by the Real Estate Developers Association, CET gave awards for superior environmental protection in the design, operation and maintenance of buildings. The Sun Hung Kai Centre received 42 best practice credits out of a possible 56, and was rated Excellent. To help create a cleaner Hong Kong, the Group will continue to promote environmental protection in its other commercial properties as well.

The Centre of Environmental Technology gave the Sun Hung Kai Centre a Certificate of Assessment rated Excellent during the year.

91 Review of Operations

Staff Relations and Training

The Group and its subsidiaries, excluding associated companies, employ more than 16,000 people. The Group has always recognised the importance of two-way communication between management and staff, as well as among departments. The Group uses a variety of communication channels, including the Intranet, staff newsletter, poster, various activities and internal meetings, to enhance the flow of information and understanding of the Group’s mission.

The Group regards staff training and development as one of the most important management objectives. In the year under review, the Group organized over 150 staff training classes with spaces for 3,000 attendees. With a well-defined training plan, the Group provides all-rounded training to meet the staff’s training needs on personal development, management skills, business knowledge, technology update and applications, customer service, language and communication, interpersonal skills and administrative management.

To well prepare the staff to seize the business opportunities in the advent of the information technology era, the Group put much emphasis on the technology training and update. Series of seminars, workshops, presentations, visits and other activities were organized for all staff to keep them abreast of the latest technology development. Other than classroom training, the Group also offers over 100 self-learning programmes in different subjects for the staff to learn at their own pace. Staff can choose their preferred learning media such as printed materials, video, cassette, audio and video compact disc, computer disc or on-line in the intranet.

Supporting the frontline staff to provide quality service to the customers, the Group started a large scaled customer service training programme in the early of 1999 for all the property management staff. The programme covers over 5,000 frontline staff and is followed by systematic service checking and measurement. 92 Staff Relations and Training (cont(cont’’d)

In addition to attending in-house training programmes, staff are also encouraged to take courses organized by external institutions. The Group has set up an external training sponsorship scheme for all levels of staff to apply. All the job required programmes ranging from short seminars to full degree courses will be sponsored when they are endorsed as relevant to the applicants’ duties.

In January 1999, the Staff Training Award Scheme was launched to recognize staff who were active in attending training and had outstanding job performance. There were 11 staff presented with the award in the 1999 presentation ceremony held in March. This annual award scheme further demonstrates that the Group treasures staff as the most important assets, and is committed to providing a satisfying and learning working environment for them.

To strengthen team spirit and sense of belonging, the Group held a wide range of staff activities to further consolidate its fine tradition of togetherness. Diversified activities suit all interests, such as sports, outings, interest classes, and lectures.

The Group also encourages its staff to get involved in the community and charitable events. In the year under review, staff members took part in the Community Chest’s Dress Casual Day, Corporate Challenge Marathon, Walk for Millions in Kai Tak Airport and Sports Development Board’s Sport Dress Day. Other events were Flag Day and Blood Donation Day. Staff members also supported Social Welfare Department’s volunteer service.

The Group organized over 150 staff training classes during the year.

93 Review of Operations

The Group and The Community

The Group is committed to bettering society and it has a long- standing practice of assisting social welfare and educational organizations. During the year under review, it contributed over HK$17 million to various charitable organizations.

The Group traditionally supports the Community Chest. Over the year, it donated HK$1 million to the Chest’s Corporate Challenge Marathon, once again making it one of the largest contributors for the event, and it donated over HK$850,000 to the Chest’s Corporate and Employee Contributions Programme, receiving another Platinum Award.

As a committed supporter of education, the Group continued its sponsorship of MBA students at the Chinese (CUHK), and assisted an initial group of top students from the mainland in their pursuit of undergraduate degrees at CUHK. Another HK$ 1 million went to the “Training Scheme for New Territories West Schools”. The Group also assisted in building a secondary school in Tuen Mun and donated HK$600,000 to the school to improve its teaching environment. The Group continued its funding for the Hong Kong Sports Development Board for top student athletes as well.

Tsinghua University in Beijing is highly appreciative of the award scheme for young professors the Group established at the school. The Group injected another HK$1 million to the scheme during the year under review, rewarding more outstanding young professors.

The Group helped the Hong Kong School for the Deaf hold its first art exhibition by underwriting all the costs and providing free exhibition space. Over 100 pieces were sold for charity and the sale raised about HK$100,000 to purchase teaching aids for the school. This was the third year that the Group was the sole sponsor of Rehab Power’s charity walk, and the Group also donated HK$100,000 to the Samaritans to support their suicide prevention hotline. 94 The Group and The Community (cont(cont’’d)

And the Group continued to provide rent-free office space for Project ORBIS by extending their lease for two more years, with an expected saving of over HK$2 million for the charity.

Since it was established, the SHKP Fund for the Elderly has helped to improve the quality of life for more than 10,000 seniors. During the year under review, the Group contributed another HK$500,000 to the fund, to benefit more elderly people. The Group takes advantage of its prime shopping mall locations, providing charities free space in the malls for fund raising events.

To keep up with the high-tech age, the Group was particularly active in helping IT specialists during the year under review. To nurture local technology development, the Group sponsored two high-tech projects in the second half of 1999. It contributed HK$1 million to the “Information Technology Entrepreneur Programme”, launched by the Government and several local universities to provide young IT specialists with initial business start-up funds, and the Group established Hong Kong’s first CyberIncubator-SHKP.Tech Centre CyberIncubator-SHKP.Tech Centre, offering 14,000 square feet of office space in Kodak House, rent-free for new high-tech companies.

The Group was the sole sponsor of Rehab Power’s charity walk. Mr Kwong Chun (fifth from left), Exective Director, officiated at the opening ceremony.

95 Management Discussion and Analysis

Financial Review

Review of Results The Group’s results are summarised as follows:

Turnover Increase/ Operating Increase/ (Decrease) Profit (Decrease) 1999 1998 1999 1998

HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million

Property sales 14,991 15,304 (313) 4,960 8,939 (3,979) Rental income 5,510 5,650 (140) 4,203 4,443 (240) Hotel operation 542 545 (3) 134 132 2 Interest income 543 435 108 543 434 109 Other income 2,094 1,288 806 767 435 332

23,680 23,222 458 10,607 14,383 (3,776)

Interest expenses (1,932) (2,180) (248) Exceptional items 595 (4,700) 5,295

Infrastructure, transportation & telecommunications 272 593 (321) Net rental profit 62 141 (79) Property sales 512 547 (35) Others 33 27 6

Share of profits from associated companies and jointly controlled entities 879 1,308 (429)

Taxation (867) (1,302) (435) Minority interests (4) (249) (245)

Profit attributable to shareholders 9,278 7,260 2,018

96 Management Discussion and Analysis (cont’d)

Turnover The Group’s turnover increased by two per cent to HK$23,680 million. Growth was recorded in revenue from interest and other income derived from building management, car parking, transport infrastructure management and construction. This growth was offset by a modest decline in revenue from property sales and gross rental income, each by two per cent compared to the previous year. Through more completions and sales of residential properties to mitigate lower property prices, the Group managed to achieve property sales revenue of HK$14,991 million for the year.

Operating profit The Group’s operating profit amounted to HK$10,607 million, a 26 per cent decrease compared to the previous year.

Property Sales Affected by the drop in residential property prices, operating profit from property sales declined by a 45 per cent on a year-on- year basis to HK$4,960 million. The Group disposed of some non-core investment properties during the year, including Lodge on the Park and Royal Court, generating a profit of about HK$440 million. As a result of the market downturn, the operating margin from property sales reduced to 33 per cent from 58 per cent a year ago.

Rental Income Given the resilient nature of the rental portfolio, the Group’s overall occupancy remained relatively high at 95 per cent throughout the year. Gross and net rental income for the year amounted to HK$5,510 million and HK$4,203 million, a decline of two per cent and five per cent respectively compared to last year. The full year rental contributions from Grand Century Place in Mongkok, and East Point City shopping centre in Tseung Kwan O helped to compensate for lower rents upon renewal and new leases. The disposal of some residential properties and car

97 Management Discussion and Analysis (cont’d)

parks over the past two years also affected rental income, though to a lesser extent than in the previous year. Millennium City Phase 1 was completed in September 1998 and was fully let by the year end. This development will generate a full year rental contribution in the coming year.

Hotel Operations Profit contributions from hotel operations increased by 1.5 per cent year-on-year to HK$134 million. Although average room rates were under pressure, average occupancy continued to improve over the year with operating margins maintained at 25 per cent. Despite the tough environment, the Group continued its efforts on improving operating efficiency and controlling costs.

Interest Income Interest income increased by 25 per cent over the previous year to HK$543 million. The Group’s average cash and cash equivalent balance increased during the year as a result of strong net operating cash inflow and low capital expenditure on land acquisition.

Other Income Profit from other income surged 76 per cent year-on-year to HK$767 million. The increase in profit was mainly derived from better performance in the main operations including property management, car parking and transport infrastructure management, financial investments and construction activities, and in particular, the gain from the disposal of some long term investments, amounting to HK$192 million.

Interest Expenses Gross interest expenses before capitalization dropped by 24 per cent to HK$2,126 million compared to HK$2,810 million in the previous year. During the year, the Group’s gross debt was reduced by HK$10 billion. Interest rates have also stabilized at a lower level during the year. Interest expenses after capitalization amounted to HK$1,932 million, down 11 per cent from last year.

98 Management Discussion and Analysis (cont’d)

Exceptional Items The dilution of holdings in SmarTone, from 33 per cent to about 26 per cent as a result of a new share issue to another shareholder during the year, gave rise to a capital gain of HK$595 million. A total provision of HK$4.7 billion was made for the diminution in value of property development projects and long term investments in the previous year. No such provision was required in the year under review.

Share of Profits from Associated Companies and Jointly Controlled Entities

The profit decline was mainly due to a reduced contribution from SmarTone, which was down from HK$378 million last year to HK$212 million this year. The loss incurred by Route 3 (Country Park Section) in its first year of operation was mainly due to initial low traffic volume during the start-up period. However, there has been a steady growth in traffic flow since the opening.

Net rental profit from jointly controlled entities also declined by HK$79 million compared to the previous year. The decline was caused by interest and operating expenses of certain newly completed investment properties in mainland China, where leasing only started late in the year. The rental contribution from One International Finance Centre, in which the Group has a 47.5 per cent interest, is not significant during the year, owing to rent- free periods, promotional and pre-operating expenses, but is expected to be significant in the coming year as over 90 per cent of the retail space and 80 per cent of the office space has already been let.

99 Management Discussion and Analysis (cont’d)

Taxation The decrease in taxation reflects the lower operating profit as well as the blanket refund of 10 per cent of profits tax paid for the 1997/98 year of assessment by the Govenment and the write-back of tax over-provided for in prior years.

Minority Interests Minority interests in the Group’s property development projects completed this year are less than in the previous year, and as a result, the share of profits to minority shareholders has declined.

Review of Financial Position

Summary of Assets

Increase/ 1999 1998 (Decrease)

HK$ million HK$ million HK$ million

Fixed assets 77,915 91,210 (13,295) Associated companies 4,552 3,743 809 Jointly controlled entities 17,744 10,576 7,168 Long term investments 1,333 1,974 (641) Secured loans 2,482 1,880 602 Land pending development 27,665 30,233 (2,568) Net current assets 8,517 8,237 280

140,208 147,853 (7,645)

100 Management Discussion and Analysis (cont’d)

Fixed Assets The decline in fixed assets was due to the diminution in value of the Group’s completed investment property and hotel portfolios by the amounts of HK$11,839 million and HK$298 million respectively, as a result of the property market downturn.

Associated Companies The increase in associated companies was mainly attributable to a HK$595 million increase in the Group’s share of net assets in SmarTone, arising from the dilution of shareholding as a result of a new share issue at a premium during the year. In addition, there were some profits retained in associated companies and investments made to finance the operations of associated companies.

Jointly Controlled Entities The increase in jointly controlled entities was primarily due to a rise in loans advanced to jointly controlled entities for property development and investment activities, including the Airport Railway Tung Chung Station Development (Package One), One International Finance Centre, Royal Peninsula in Hung Hom, Ocean Shores in Tseung Kwan O, Millennium City Phase 2 in 57 66 Kowloon East, TKOTLs 57 & 66 in Tseung Kwan O and the Aldrich Bay site. Further loans were also advanced for infrastructure projects including the River Trade Terminal in Tuen Mun and Container Terminal 9, as well as for refinancing project loans for certain property projects in mainland China.

101 Management Discussion and Analysis (cont’d)

Long Term Investments Long term investments fell HK$641 million to HK$1,333 million, mainly due to the disposal of certain investments.

Secured Loans Secured loans increased by HK$602 million to HK$2,482 million. The increase was due to the provision of home mortgage financing for purchasers of the Group’s residential properties.

Land Pending Development Land pending development dropped by HK$2,568 million to HK$27,665 million, mainly due to the transfer of land on which construction commenced during the year to current assets. The decrease was partially offset by expenditure on land acquisition.

Net Current Assets Net current assets amounted to HK$8,517 million, a three per cent increase over the previous year. Stock increased by HK$2,175 million, mainly due to unsold units in Grand Pacific Views & Grand Pacific Heights, which were completed but not yet launched during the year. The bulk of the units were sold after the financial year end. Cash and cash equivalent balance at the year end decreased by HK$2,543 million due to the utilization of cash to repay bank and other borrowings. Short term borrowings, including the portion of long term borrowings scheduled for repayment within a year, decreased by HK$2,178 million over the previous year to HK$4,781 million. The decline was partially offset by an increase in the proposed final dividend of HK$1,086 million.

102 Management Discussion and Analysis (cont’d)

Summary of Liabilities and Equity

Increase/ 1999 1998 (Decrease)

HK$ million HK$ million HK$ million

Share capital 1,201 1,196 5 Share premium and reserves 105,412 112,506 (7,094)

Shareholders’ funds 106,613 113,702 (7,089) Long term liabilities 16,253 24,127 (7,874) Minority interests 967 880 87 Deferred items 16,375 9,144 7,231

Total 140,208 147,853 (7,645)

Shareholders’ Funds Shareholders’ funds decreased from HK$113,702 million to HK$106,613 million, mainly due to the decline in property revaluation reserves as a result of downward adjustment in the value of completed investment properties, which more than offset the year’s retained profit.

Long Term Liabilities The reduction in long term liabilities was due to the repayment of bank loans and the redemption of Eurobonds and Samurai bonds at maturity during the year.

Minority Interests The increase in minority interests was mainly due to the advances received from minority shareholders. The increase was partially offset by a diminution in the value of completed investment properties and dividends paid to minority shareholders.

103 Management Discussion and Analysis (cont’d)

Deferred Items Deferred items increased by HK$7,231 million to HK$16,375 million, reflecting the increased proceeds from the pre-sale of residential properties. Sales deposits received in the year were mainly from Castello, Le Sommet, Scenic View, Mount Haven, Grand Horizon and Chelsea Heights Phase 2.

Recurrent Income The Group has a solid recurrent income base. Including its share of profits less losses from jointly controlled entities and associated companies, the Group’s recurrent profit before interest and tax for the year amounted to HK$5,803 million, representing approximately 50 per cent of total. The substantial percentage increase in the proportion of recurrent income was mainly due to the decline of residential property prices which led to lower development profits.

Recurrent Earnings by Source Recurrent Profit as a Percentage of Total Earnings* Per Cent

60

50.5 50

40.6 41.7 40 39.4 34.4

30

20

10

0 1995 1996 1997 1998 1999

*

* Profit before interest, tax and exceptional items, including share of profits less losses of associated companies and jointly controlled entities

104 Management Discussion and Analysis (cont’d)

Capital Structure, Liquidity and Debt Maturity Profile The Group has a strong capital base and a low debt leverage. Its shareholders’ funds totalled HK$106,613 million as at 30th June 1999. The Group’s gross borrowings as at 30th June 1999 amounted to HK$21,034 million, reduced by HK$10,052 million over the previous year. Net debt (gross borrowings less cash and cash equivalent) at the year end was HK$12,786 million (1998: HK$20,295 million). It is the Group’s policy to maintain a high interest cover and low financial gearing. Interest cover for the year ended 30 June 1999 was 5.4 times (1998: 5.6 times), based on gross interest expenses before capitalization and profit before interest and tax. Net debt to shareholders’ funds, was 12.0 per cent at the year end (1998: 17.8 per cent).

5.4 5.6

Net Debt to Shareholders’ Funds Ratio Net Debt Per Cent HK$ Million 30,000 25 26,671 25,000 20 19.8 17.8 20,000 20,295 15 15,000 12.0 12,786 10 9.6 10,000 9,276 8,829 8.2

5 5,000

0 0 1995 1996 1997 1998 1999 1995 1996 1997 1998 1999 Year Year

105 Management Discussion and Analysis (cont’d)

Approximately 12 per cent of the Group’s gross borrowings were on a fixed rate basis and 88 per cent were on a floating rate basis at the balance sheet date. Interest rate swaps were employed to manage the Group’s exposure to interest rate fluctuations. It is the Group’s policy not to enter into derivative transactions for speculative purposes. At the year end, approximately 97 per cent of the Group’s gross borrowings were denominated in Hong Kong dollars. The remaining three per cent were in US dollars, and therefore, the Group had negligible foreign exchange exposure. The maturity profile of the Group’s borrowings as at 30th June 1999 was spread over a period of eight years, with approximately 23 per cent repayable within one year, 16 per cent repayable between one and two years, 55 per cent repayable between two and five years and six per cent repayable beyond five years.

Capital expenditure incurred by the Group for the year was HK$1,300 million, which was mostly financed from internal cash resources. Net cash inflow generated from operating activities during the year amounted to HK$20,333 million, providing strong support for the Group’s investment activities and financing requirements. The Group’s cash and cash equivalents as at 30th June 1999 totalled HK$8,248 million. In addition, the Group has in place substantial undrawn banking facilities on a committed basis, which are more than adequate for its future capital expenditure and its on-going working capital requirements.

Debt Maturity Profile

106 Group Financial Summary

1995 1996 1997 1998 1999

For the year ended 30th June HK$ HK$ HK$ HK$ HK$

Earnings per share 4.46 4.69 5.93 3.04 3.87

Dividends per share 1.75 1.86 2.35 1.20 1.55

Special cash bonus per share 0.38 0.38 0.38 – –

Shareholders’ funds at book value per share 41.40 45.10 56.38 47.55 44.40

Financial ratios: Net debt to shareholders’ funds Net debt 9.6% 8.2% 19.8% 17.8% 12.0% Shareholders’ funds

Interest cover Profit before interest and tax 8.7 9.3 10.4 5.6 5.4 Gross interest expenses before capitalisation

HK$M HK$M HK$M HK$M HK$M

Turnover 19,845 22,619 28,960 23,222 23,680

Operating profit 12,515 12,635 17,006 14,383 10,607

Profit attributable to shareholders 10,363 11,039 14,160 7,260 9,278

107 Group Financial Summary (cont’d)

Balance Sheet

1995 1996 1997 1998 1999

As at 30th June HK$M HK$M HK$M HK$M HK$M

Fixed assets 76,374 81,839 111,547 91,210 77,915

Investments and loans 10,251 14,691 23,652 18,173 26,111

Land pending development 20,685 22,042 28,901 30,233 27,665

Net current assets 7,029 5,423 6,566 8,237 8,517

114,339 123,995 170,666 147,853 140,208

Share capital 1,162 1,195 1,195 1,196 1,201

Share premium and reserves 95,041 106,559 133,514 112,506 105,412

Shareholders’ funds 96,203 107,754 134,709 113,702 106,613

Long term liabilities 14,440 13,392 33,763 24,127 16,253

Minority interests 2,288 2,031 948 880 967

Deferred items 1,408 818 1,246 9,144 16,375

114,339 123,995 170,666 147,853 140,208

108 Directors and Organisation

Directors and Senior Management

KWOK Ping-sheung, Walter 48 MSc (Lond), DIC, MICE, JP Chairman & Chief Executive (Age: 48) Mr Kwok has been with the Group for 24 years. He holds a Master of Science degree in Civil Engineering from Imperial College, University of London, and is a member of the Institute of Civil Engineers. He is a director of The Kowloon Motor Bus Holdings Ltd., USI Holdings Ltd., Wilson Parking (HK) Ltd. and Hung Cheong Import & Export Co., Ltd.

He is also a director of The Real Estate Developers Association of Hong Kong and Honorary Treasurer of the Federation of Hong Kong Hotel Owners. On the community front, he is a member of the National Committee of the Chinese People’s Political Consultative Conference, Vice Chairman of the All China Federation of Industry and Commerce and Chairman of the Former Directors Committee of the Hong Kong Community Chest.

Dr LEE Shau-kee 71 DBA (Hon), DSSc (Hon), LLD (Hon) Non-Executive Director (Age: 71) Vice Chairman Dr Lee has been a non-executive director of the Company for the last 27 years. He is the founder and Chairman and Managing Director of Henderson Land Development Co. Ltd. and Henderson Investment Ltd. He has been engaged in property development in Hong Kong for more than 40 years. He is also Chairman of Henderson China Holdings Ltd. and The Hong Kong and China Gas Company Ltd. as well as a director of The Hong Kong Ferry (Holdings) Company Ltd., The Bank of East Asia, Ltd. and The Miramar Hotel and Investment Co., Ltd.

KWOK Ping-kwong, Thomas 47 MSc (Bus Adm), BSc (Eng), AMICE, JP Vice Chairman & Managing Director (Age: 47) Mr Kwok has been with the Group for 19 years. He holds a Master’s degree in Business Administration from the London Graduate School of Business Studies and a Bachelor’s degree in Civil Engineering from Imperial College, University of London. He is a director of USI Holdings Ltd.

109 Directors and Organisation (cont’d)

He is currently Executive Vice President of The Real Estate Developers Association of Hong Kong, a council member of the Hong Kong Construction Association and a board member of The Community Chest of Hong Kong.

KWOK Ping-luen, Raymond 46 MA (Cantab), MBA Vice Chairman & Managing Director (Age: 46) Mr Kwok has been with the Group for 19 years. He holds a Master of Arts degree in Law from Cambridge University and a Master’s degree in Business Administration from Harvard University. He is Chairman of SmarTone Telecommunications Holdings Ltd., Vice Chairman of The Kowloon Motor Bus Information Technology Entrepreneurs Holdings Ltd. and a director of Route 3 (CPS) Co. Ltd., Airport Association Limited Versitech Limited Freight Forwarding Centre Company Ltd, Information Technology Entrepreneurs Association Limited and Versitech Limited.

With respect to his civic activities, he is a non-executive director of the Securities and Futures Commission, a member of the Hong Kong Port and Maritime Board, Vice-Chairman of the Council of The Chinese University of Hong Kong and Chairman of the Management Committees of the Police Children’s Education Trust and the Police Education and Welfare Trust.

Dr HO Tim 90 Chev Leg d’Hon, DSSc (Hon), DBA (Hon), LLD (Hon), JP Non-Executive Director (Age: 90) Dr Ho has been a non-executive director of the Company since 1972. Dr Ho is Chairman of Miramar Hotel and Investment Co., Ltd. and a director of Hang Seng Bank Ltd., Co., Ltd., and King Fook Holdings Ltd. He is a permanent member of the Board of Trustees of the United College of The Chinese University of Hong Kong, a council member of the same university and a board member of the Hang Seng School of Commerce. Dr Ho is a committee member of the Tang Shiu Kin and Ho Tim Charitable Fund and is the Permanent President of Ho’s Clansmen Association Ltd. He holds the Honorary Presidencies of the Pun U District Association of Hong Kong and The Chinese Gold & Silver Exchange Society.

110 Directors and Organisation (cont’d)

Sir WOO Po-shing 70 Hon. LLD, FCIArb, F.I. Mgt., FInstD Non-Executive Director (Age: 70) Sir Woo Po-shing has been a non-executive director of the Company since 1972. He is a solicitor and a consultant of Woo, Kwan, Lee & Lo, Solicitors & Notaries, and a director of Henderson Development Ltd., Henderson Land Development Co. Ltd. and Henderson Investment Ltd. He was awarded an Hon. LLD. by the City University of Hong Kong and is a fellow of King’s College of London as well as Honorary Professor of Nankai University of Tianjin. He is also the founder of the Woo Po Shing Medal in Law and the Woo Po Shing Overseas Summer School Travelling Scholarship, both at the University of Hong Kong, and the Woo Po Shing Professor (Chair) of Chinese and Comparative Law at City University.

Dr. FUNG Kwok-king, Victor 53 BSc, MSc, PhD Non-Executive Director (Age: 53) Dr Victor Fung was appointed as one of the Group’s Independent Non-Executive Directors in May 1999.

Dr Fung holds Bachelor’s and Master’s Degrees in Electrical Engineering from the Massachusetts Institute of Technology and a Doctorate in Business Economics from Harvard University.

Prudential Asia Dr Fung is Chairman of Prudential Asia, the Li & Fung Group 1991 and the Hong Kong Airport Authority, and has been the Chairman 1996 of the Hong Kong Trade Development Council since 1991. He was the Hong Kong Representative on the APEC Business Advisory Council in 1996, and is a member of the Hong Kong Government Judicial Officers Recommendation Committee.

1995 Dr Fung was voted Businessman of the Year under the Hong 25 Kong Business Awards Scheme in 1995 and one of the Top 25 Managers in Business Week magazine’s poll in the same year. He 1998 was also named Leader of the Year by /Hong Kong Standard in 1998.

111 Directors and Organisation (cont’d)

KWAN Cheuk-yin, William 65 LLB Non-Executive Director (Age: 65) Mr William Kwan was appointed as one of the Group’s Independent Non-Executive Directors in July 1999.

As a Senior Partner with the Solicitors firm of Woo, Kwan, Lee & Lo, Mr Kwan has 37 years of experience in legal practice. He is a former Director and Adviser of the Tung Wah Group of Hospitals, a past Member of the Stamp Advisory Committee, Vice Chairman of the Hong Kong Scout Foundation, Chairman of the Hong Kong Branch of the King’s College London Association, President of the Hong Kong Philatelic Society and a Member of the Executive Committee of the Federation of Inter-Asia Philately.

’94 ’97 Mr Kwan was Commissioner General and Vice Chairman of the Hong Kong ’94 and ’97 Organizing Committees, and has been a Member of the Hong Kong Golf Club General Committee since 1998. He graduated from King’s College, London University and is a Fellow of both King’s College and the Institute of Arbitrators.

LO Chiu-chun, Clement 69 Non-Executive Director (Age: 69) Mr Lo was an executive director of the Company and Company Secretary for 28 years before he resigned from both positions in early 1998. Mr Lo has been in the property development industry since the 1960s.

LAW King-wan 62 Executive Director (Age: 62) Mr Law has been with the Company for 30 years and heads the Sales Department. He is a member of the Standing Committee of Provincial Committee of the Chinese People’s Political Consultative Conference, a Standing Committee member of the Chinese General Chamber of Commerce, Permanent President of the Hong Kong Institute of Real Estate Administration and President of the Shun Tak Fraternal Association.

CHAN Kai-ming 67 CEng, FIStructE, MICE Executive Director (Age: 67) Mr Chan has been an executive director since 1981. He is a non- executive director of a publicly-listed company, ACME Landis Holdings Ltd., Mr Chan also served as an appointed member of 112 the District Board of Shatin for three years from 1985. Directors and Organisation (cont’d)

CHAN Kui-yuen, Thomas 52 B Comm Executive Director (Age: 52) Mr Chan graduated from the United College, The Chinese University of Hong Kong. He joined the Group in 1973 and is now responsible for land acquisitions and project planning matters as well as all of the Group’s projects in Beijing.

KWONG Chun 69 Executive Director (Age: 69) Mr Kwong graduated from Zhong Nan Finance & Economics College of Wuhan in China. He worked for the Guangzhou office of the People’s Bank of China before coming to Hong Kong in 1962 and working for Eternal Enterprises Ltd. He was transferred to Sun Hung Kai Enterprises Ltd. in 1963. In 1972, Sun Hung Kai Properties Ltd. became a listed company and he has worked for it ever since. He was appointed as an executive director in 1992.

WONG Yick-kam, Michael 47 BBA, MBA Executive Director (Age: 47) Mr Wong has been with the Group for 18 years. He obtained his Bachelor’s and Master’s degrees in Business Administration from The Chinese University of Hong Kong. He was appointed an executive director in January 1996 and is responsible for the Group’s strategic planning, infrastructure projects, financial investments, and relations with the investment community.

WONG Chik-wing, Mike 43 FHKIS, RPS Executive Director (Age: 43) Mr Wong graduated from the Hong Kong Polytechnic with distinction. He is a fellow of the Hong Kong Institute of Surveyors and a Registered Professional Surveyor. He joined the Group in 1981 and is currently responsible for project management of the Group’s developments. 113 Directors and Organisation (cont’d)

(1)

(12) (2) (9) (10) (11) (13) (14)

(3) (15)

(4) (16)

(5) (17)

(5a) (18)

(6) (19)

(7) (20)

(8) (21)

(22)

(23)

(24)

(25) 114 Directors and Organisation (cont’d)

(1) (15) (5a)

(6) (1a) (16) (7) (1b) (17) (2) (8) a.

(18) b.

(19)

(3) (9) (20) a.

b. c. d. (10)

(4) (21) (11)

(12) (5) (22)

(13)

(23)

(24)

(14)

(25)

115 Directors and Organisation (cont’d)

ORGANISATION CHART AND SENIOR EXECUTIVES

Chairman & Chief Executive Walter P.S. Kwok (1)

Vice Chairman & Vice Chairman & Managing Director Managing Director Thomas P.K. Kwok Raymond P.L. Kwok

Corporate Planning Project Planning Project Management Leasing Sales Building Management & Investments Executive Director China Executive Director Executive Director Executive Director Executive Director Executive Director Thomas K.Y. Chan (10) (12) Mike C.W. Wong (2) K.M. Chan (9) K.W. Law (11) Kwong Chun (13) Michael Y.K. Wong (14)

Architectural & Business Eng. Development (3) (15)

Strategic Special Projects Development (4) (16)

Construction Financial (5) Services (17)

Mechanical Corporate & Electrical Finance Installation (5a) (18)

Project Monitoring Insurance (6) (19)

Estate Valuation Management (7) (20)

Transport Hotel Infrastructure (8) Management (21)

Company Secretarial & Legal (22)

Internal Affairs (23)

Accounts (24)

Internal Audit (25)

116 Directors and Organisation (cont’d)

(1) Executive Committee Au Ho-cheung, David Ng Chuek-ting BSc(Arch), MArch, HKIA BSc(Eng) Kwok Ping-sheung, Walter Registered Architect Senior Structural Engineer MSc(Lond), DIC, MICE, JP Authorized Person Chairman and Chief Executive Deputy Manager Li Chun-kou BSc(Eng) Kwok Ping-kwong, Thomas Chu Kwok-kit, Ringo Senior Structural Engineer MSc(Bus Adm), BSc(Eng), AMICE, JP BA(AS), BArch, RIBA, HKIA, ARAIA Vice Chairman and Managing Director Registered Architect Choi Siu-chuen Authorized Person Deputy Chief Building Services Engineer Kwok Ping-luen, Raymond Deputy Manager MA(Cantab), MBA Ng Tze-kwan, Jeff Vice Chairman and Managing Director Lu Chee-yuen, Spencer BFA, BArch, MAIBC, MRAIC, HKIA BEng, MEng, CEng, MIStructE, MHKIE Registered Architect Law King-wan Authorized Person - Engineer Authorized Person Executive Director (Sales) Assistant Manager Architect

Chan Kai-ming Wong Kim-wing, Ball Lau Kay-shui CEng, FIStructE, MICE BA(AS), BArch, HKIA MSc, CEng, MIStructE, MHKIE, RPE Executive Director (Leasing) Registered Architect Senior Structural Engineer Authorized Person Chan Kui-yuen, Thomas Assistant Manager Lau Man-kwan, Julia B Comm BArch, HKIA Executive Director (Project Planning) Woo Yan-fan, Stella Registered Architect BA(AS), MArch, MBA, HKIA Authorized Person Kwong Chun Registered Architect Architect Executive Director (Building Authorized Person Management) Assistant Manager Chiu Wai-kuen, Stephen BSc(Eng) Wong Yick-kam, Michael Chiu Hon-hang, Elvin Senior Structural Engineer BBA, MBA BES, BEDS, BArch, HKIA, RIBA, Executive Director (Corporate Planning ARAIA Leung Yuen-dick, Dick & Investments) Registered Architect BA(AS), BArch, MA Arbitration, HKIA Authorized Person Registered Architect Wong Chik-wing, Mike Assistant Manager Authorized Person FHKIS, RPS Architect Authorized Person Ng Chak-kin, Clarence Executive Director (Project Management) BA(AS), BArch, HKIA, RAIA, RIBA Chiu Tai-shing, Joseph Registered Architect BASc Authorized Person Senior Structural Engineer (1a) Management Consultant Assistant Manager Li Ka Wing Yung Wing-chung Chan Hong-ki, Robert Assistant Manager BSc, ARICS, AHKIS Leung Kui-king, Donald Registered Professional Surveyor BSc Authorized Person (4) Special Projects Assistant Manager Trevor Farnworth (1b) Chairman’s Office Chui Ching-sai, Alex FRICS, FHKIS, RPS BSc, MBA Property Advisor Kwok Tai-wai, David Assistant Manager Chu Chung-kai, Samson BSc (Hons), ARICS, AHKIS (2) Project Management (3) Architectural and Engineering Manager

Wong Chik-wing, Mike Sitt Nam-hoi Pih Kam-shen, Philip FHKIS, RPS BA(Hons), BArch(Distinction), HKIA MHKIE, MASHRAE, MRSES, Authorized Person Registered Architect MHIREA, RPE Executive Director Authorized Person Deputy Manager (Building Services & Chief Architect Maintenance) Tam Tin-fong, Martin BArch, RIBA, Architect HKIA Yu Chung-yeung Chiu Ching-shi, Iris Registered Architect CEng, FIStructE, FHKIE, MICE, RSE, B Comm Authorized Person RPE Deputy Manager (Leasing & Manager Principal Engineer Management)

Tung Chi-ho, Eric Li Kwong-hing Lau Lai-ching, Ellijah BA(AS)Hons, BArch, RIBA, HKIA BSc(Eng), MSc, DIC, CEng, MIMechE, Dip.BS(M), MHIREA, MCIH, MHKIH Registered Architect MCIBSE, MHKIE Deputy Manager (Leasing & Authorized Person Chief Building Services Engineer Management) Manager Ip Wing-kok Kwan Yu-kuen, Ricky Au Yeung Shiu-keung CEng, MIStructE, MHKIE, RSE, RPE Assistant Manager (Building Services BSc(Eng), CEng, FHKIE, FCIBSE, FIEE, Chief Structural Engineer & Maintenance) FIEAust Manager Yau Hin-chung, William Andrew Bliss BA(AS) FRICS, FHKIS Deputy Manager Chartered Valuation Surveyor Assistant Manager (Technical) 117 Directors and Organisation (cont’d)

Ho Chi-hong, Kurt Loo Wing-lam, William Siu Man-wai MCIH, MIMBM DMS, MIFPO, MIAAI, MHKISA, CPM BSc(Hons), ARICS, AHKIS Assistant Manager (Leasing of Shanghai) Assistant Manager (Safety) Chartered Valuation Surveyor Deputy Manager Chan Kin-wah, Jonathan (5) Construction TechRICS Assistant Manager (Contract Subletting) (8) Hotel Tsoi Siu-ho, Robert BSc, MSc, FHKSA, ACMA, ARCS, DIC Lai Wai-ching, Phoebe a. Royal Garden Hotels International Manager MSc, ACCA, AHKSA Corporation Assistant Manager (Accounting) Yu Chung-yeung Chow Yum-chong, Francis CEng, FIStructE, FHKIE, MICE, RSE, Chan Wai-leung, Eric FCCA, FHKSA RPE Assistant Manager (Contracts) Vice President (Finance) Manager The Royal Garden Lee Bing-shu Construction Projects’ Team: Chan Tin-yau, Keven Manager CHSP Cheung Kam-fan General Manager Kwok Leung Kit-kan, Ingrid Assistant Manager (Construction MSc(Bus Adm), BSc(Hons), CEng, Management) Cheung Kin-man, Ricky MBCS, MHKIE BMgt(Hons), B Comm, ASA Manager Tse Kam-hon, Sidney Financial Controller Assistant Manager (Construction Hui Lin-sing, Roger Management) Cheah Hock-wah, John BSc(Eng), CEng, MICE, MIStructE, Executive Assistant Manager MHKIE, RSE, RPE Lam Fuk-wing Deputy Manager BSc (Civil Eng) b. New Town Management Company Assistant Manager (Construction Limited Mo Kon-fei, Kenneth Management) MSc(Eng), MBA, CEng, MHKIE, MICE, Wong Hoi-jen, Rebecca MIStructE Vice President (Operations & Authorized Person (5a) Mechanical & Electrical Installation Planning) Registered Structural Engineer Deputy Manager Yu Yiu-wing Royal Park Hotel Manager Chan Hon-yee Tam Kam-ming, Andrew ACMA, AHKSA Sin Hung-fai Financial Controller Deputy Manager (Accounts, Assistant Manager (Fire Services) Administration and Contract Subletting) Cheung Cheuk-man, Carman Ng Chung-ming Hotel Manager Wong Leung Kit-wah, Linda Assistant Manager Deputy Manager (Purchasing) Royal Plaza Hotel Chan Chor-tat, Gilbert Sun Tien-yen, Stephen Assistant Manager Wong Hoi-jen, Rebecca Dip. Civil Eng General Manager Deputy Manager (Construction Tam Ping-ip Management) Assistant Manager (Electrical Services) Lee Chi-keung, Marvey Financial Controller Tsoi Yuk-man, Desmond Pang Ki-kai MA, FCIArb, ARICS, AHKIS, MCIOB AIIM Deputy Manager (Contracts) Assistant Manager (9) Leasing

Lee Kwok-wa, Chris a. Chan Kai-ming Assistant Manager (Project (6) Project Monitoring CEng, FIStructE, MICE Administration) Executive Director Luk Wang-kwong, John Lau Wai-keung, Dennis BSc(Eng), LLB, MSc(Eng), MBA, PhD, Yeung Siu-mei, Joanna ARICS, AHKIS CEng, PDCE, FICE, FIStructE, FHKIE, Deputy Manager Assistant Manager (Contract Subletting) FCIArb Project Advisor Lam Ka-keung, Henry Chan Ying-kuen, David BSc(Hons) Assistant Manager (Cost Accounts) Wong Wai-tung Assistant Manager FCIOB, ACIArb, MHKIE Fung Chi-on, Ricky Deputy Manager b. Trevor Farnworth Assistant Manager (Purchasing) FRICS, FHKIS, RPS Tsang Wai-keung, Savio Mak Kwok-leung MBA, MCIOB, ACIArb c. Kwong Chun BSc, CEng, MIMechE, MHKIE, RPE Assistant Manager Assistant Manager (Plant & Machinery) d. Au Yeung Hau-cheong Fong Yuet-chiu, Kenneth (7) Valuation BSc(Eng), CEng, MCIBSE, MIEE, (10) Project Planning MIE.Aust. Fung Chu-hee, Andrew Assistant Manager (Mechanical & Chan Kui-yuen, Thomas Electrical) ARICS, AHKIS, RPS Chartered Valuation Surveyor B Comm Executive Director Lai Siu-ki, Pele Manager Assistant Manager (Administration) 118 Directors and Organisation (cont’d)

Au Shiu-tung, Patrick (13) Building Management Hong Pak-cheung, William FHKIS, RPS, FRICS BSc Registered Professional Surveyor Kwong Chun Deputy Manager Authorized Person Executive Director Project Planning Advisor Chan How-kwan, Irene Mok Chi-hung Assistant Manager Chien Yuan-hwei, George FCIH, FHKIH, MHIREA BSc(Eng), MSc, DIC, CEng, PEng, FICE, Manager Ramsay, Robert Guy MITE BA(Hons), PhD Transportation Advisor Lam Chak-hin, Ivan Assistant Manager SSCE, Foreign Assoc. ASLA Roger Nissim Deputy Manager (Hong Chui Landscape) Cheong Suk-ying, Linda FRICS, FHKIS, RPS B.Soc.Sc, MBA Manager Kwok Chan-fai Assistant Manager MCIH, MHKIH Au Yeung Hau-cheong Deputy Manager (Hong Yip) Tsui Kwan-ying, Connie Manager BSc Tung Siu-lun Assistant Manager Yiu Wai-ha, Connie BSc(Eng), CEng, MIEE ARICS, AHKIS Deputy Manager (Lik Kai) Deputy Manager (15) Business Development Wong Kei-on Wong Shui-ping, Kally BA, MHKIH, MCIH Lui Ting, Victor Assistant Manager Assistant Manager (Hong Yip) BBA Manager (Property Investment) Law Yee-wah, Alice Chan Wah-kay BEc B Comm Tsim Tak-po, Paul Assistant Manager Assistant Manager (Personnel) BSc(Hons), ACA, AHKSA Manager (Business Development) Lee Tze-leung, Adrian (11) Sales BBA, MBA, FCCA, AHKSA Pang Yat-shan, Daniel Assistant Manager (Accounting) BSc(MIT), MArch(Princeton), RA, AIA, Law King-wan ASCE, NCARB Executive Director Leung Nai-yin, Arthur Manager (Business Development) ACIB, FHKSA, FCCA, AHKIB, CGA, So Chung-keung, Alfred B.Bus, CPA Chew Guat-leng, Linda BSc, MSc Assistant Manager (Internal Audit) BEcon(Hons), MBA(Harvard) Manager Deputy Manager (Business Development) Ho Yun-kuen, John Tung Yiu-kwan, Stephen ARICS, AHKIS, PQS Lam Kin-ning BSc, MSc Assistant Manager (Contracts) BArch, BA(AS)Hons, MSc(Urban Manager Planning), HKIA Chau Chung-yiu, Dominic Senior Architect (Property Investment) Yim Dao-kit MBA, ARICS, AHKIS Deputy Manager Assistant Manager (Technical) Leung Tat-ming, Raymond MBA Kong Kit Chan Cheng-san, Sam Deputy Manager (Business Development) Deputy Manager B Comm Assistant Manager (Nixon & Nicole) Chau Sai-yim, Stephen Deputy Manager (Business Development) (12) China (14) Corporate Planning and Investments Chui Yu-wing, Ringo Chan Kui-yuen, Thomas BSc B Comm Wong Yick-kam, Michael Assistant Manager (Business Development) Executive Director BBA, MBA Executive Director Chan Sau-yin, Anita Teresa Tam Tin-fong, Martin ARICS, AHKIS BArch, RIBA, Architect HKIA Ma Sau-hon, Chris Assistant Manager (Property Investment) Registered Architect BSc, MSc, MBA, DIC, MISE, FHKIE, Authorized Person FICE, RPE, CEng Ip Pui-tung, Paul Manager (Design and Construction) Manager (Project) BA(AS), BArch, HKIA, RIBA Registered Architect Leung Yu-kai, David Lau Mei-mui, May Authorized Person FCCA, FHKSA Manager (Corporate Communications) Assistant Manager (Property Investment) Manager (Finance and Administration) Wong Pak-ho, Lawrence Ng Kwok-keung Lam Yuet-wah, Joseph BEng, MBA, CEng, CDipAF, BSc BBus, AHKSA, ASA PEng(S’pore), MICE, MHKIE Assistant Manager (Property Investment) Deputy Manager Manager (Infrastructure)

Fok Yau-kit Mak Nak-keung (16) Strategic Development FCEA, DMS, MBIM B.Soc.Sc, MPhil Assistant Manager Deputy Manager (Economic Research) Chan Kai-lung, Patrick BEc(Hons), MEc O Nam-yuen Lau Shung-oi, Susanna Manager Assistant Manager BA, ACA Deputy Manager (Financial Analysis) (17) Financial Services Au Mo-cheung, Alex 119 Manager Directors and Organisation (cont’d)

Chan Kwok-yan, Vincent Sham Sik-shing, Simon (23) Internal Affairs BA BTech(Hons), MCIH Deputy Manager Assistant Manager Wu Tze-cheung, Philip BA(Hons), FCCA, FHKSA Chung Wah-sang, Welson Chan Shing-wai Manager MA, ACIS Dip.BA, MCIH Deputy Manager Assistant Manager Ho Lick-tin Deputy Manager (Corporate Affairs) Tam Kim-hung, Joseph Choy Chi-keung, Ian MBA, FCIS, ACIB BA, MHousMan Chan Suk-kuen, Dora Deputy Manager Assistant Manager BSc Assistant Manager Chan Pang-chi Lau Wai-han, Loretta Assistant Manager BSc, BBA, AICPA, AHKSA Chan Choi-yin, Clara Assistant Manager MIHRM(HK) Assistant Manager (Personnel) (18) Corporate Finance Hon Shuk-ching, Irene Assistant Manager Wong Ho-keung, Jimmy Au Man-to Assistant Manager (Office Management) LLB, FCIS, ACIB Shiu Wai-ching, Teresa Manager Assistant Manager Fung Yick-lam, Cris Assistant Manager (Corporate Affairs) Kwok Yue-yee, Amy Sham Wai-man, Raymond B Comm MHKIH, MCIH Deputy Manager Assistant Manager (24) Accounts

Ho Ka-wai, Josephine Pun Wing-mou, Bernard MBA (21) Transport Infrastructure Management FCA, FHKSA Assistant Manager Chief Accountant Wilson Group Zhou Yimin, Andrew (19) Insurance Paul A. Simpson MBA, CMgr Chief Executive Officer Manager Chow Ka-yin Manager Sham Yat-wah, Samuel Li Ching-kam, Frederick Director & General Manager FCCA, AHKSA Wong Kwai-chuen, Andrew Deputy Chief Accountant BBA, ACII Carpark Division Deputy Manager Fok Yat-cheong, Edward Paul E. Cornish MSc(Eng) Ng Man-tong, Anthony Development Director Deputy Manager (EDP) ACII, AIIC Deputy Manager Transport & Infrastructure Division Lee Hung-chak, Maurice BBA(Hons), FCCA, AHKSA Yim Ka-yan, Amy Ngan Yau-chung, Edward Deputy Manager AAII Managing Director of Tsing Ma Assistant Manager Management Limited Chow Cheuk-wing, Eric FCCA, FHKSA Luk Kam-hon, Gary Senior Accountant (20) Estate Management General Manager of Route 3 (CPS) Company Limited Ko Ping-yin, Albert Wong Chin-wah, Jimmy Chief Cashier BSc (Est Mgt) Cert Ed, MSISV, AHKIS, MAPFM, MHIREA (22) Company Secretarial and Legal Leung Cheuk-ming, Eric Manager MSc Lai Ho-kai, Ernest Assistant Manager (EDP) Chan Kam-fai FCIS MCIH Company Secretary Tsui Chi-wai, Jack Deputy Manager Assistant Manager (EDP) Tam Sai-ming, William Lam Man-pak, Patrick LLM, MSc, MBA, FCIS, MHKSI Cheung Wai-wah BA(Hons), MCIH Manager BBA Deputy Manager Assistant Manager (EDP) Yung Sheung-tat, Sandy Leung Chung-kong, Johnny BA(Law)Hons Deputy Manager Manager (25) Internal Audit

Lee Cheung-yiu, Gordon Kwok Lau Po-chi, Helen Chiu Yue-ming, Daniel BSc(Hons), ARICS, MCIOB, AHKIS, LLB(London)Hons MAcc, FCCA, FHKSA, FCIS, ACMA, ACIArb, RPS Legal Advisor FCPA Deputy Manager Manager Cheng Chung-ho, Jeremy Mak Hung-cheung, James BSc(Hons), LLB, MEd, PCE, PCLL, Ho Kui-yuen, Kenneth BA(Hons), MBA, MBIM, MHKMA, DTM BSoc.Sc, MBA, DTM FARM Assistant Manager Assistant Manager (Training) Deputy Manager Tse Kar-lun, Frankie Wong Chung-wai, Barry Fung Sau-yim, Maureen LLB(Hons) BA(Hons), ACCA, AHKSA BSc(Hons)Est. Mgt., MBA, FIIM, Assistant Manager Assistant Manager (Audit) 120 MHIREA Deputy Manager !"# Report of the Auditors

!"#$%&'() TO THE SHAREHOLDERS OF !"#$%&'()*+ SUN HUNG KAI PROPERTIES LIMITED ! (incorporated in Hong Kong with limited liability)

!"#$%&'(^P We have audited the financial statements on pages A3 to A48 which ^QU !"#$%&'()*+ have been prepared in accordance with accounting principles !"# generally accepted in Hong Kong.

!"#$%& Respective responsibilities of directors and auditors !"#$%&'()*+,- The Companies Ordinance requires the directors to prepare financial !"#$%&'()*!"# statements which give a true and fair view. In preparing financial !"#$%&'()*+,- statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

!"#$%&'()*"+ It is our responsibility to form an independent opinion, based on our !"#$%&'()*+, audit, on those statements and to report our opinion to you. !"#$

!" Basis of opinion !"#$%&'()'*+, We conducted our audit in accordance with Statements of Auditing !"#$%&'$()* Standards issued by the Hong Kong Society of Accountants. An audit !"#!$%&'()*+, includes examination, on a test basis, of evidence relevant to the !"#$%&'()*+,- amounts and disclosures in the financial statements. It also includes !"#$%&'()*+,- an assessment of the significant estimates and judgments made by !"#$%&'()*!+, the directors in the preparation of the financial statements, and of !  !" whether the accounting policies are appropriate to the Company’s !"#$%&'()*+,- and the Group’s circumstances, consistently applied and adequately !"# disclosed.

A1 Report of the Auditors (cont’d)

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30 June, 1999 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Ordinance.

Deloitte Touche Tohmatsu Certified Public Accountants, Hong Kong

Hong Kong, 7th October, 1999

A2 Principal Accounting Policies

1. 1. Basis of consolidation The consolidated financial statements of the Group incorporate the financial statements of the Company and all its subsidiaries made up to 30th June each year and include the Group’s interests in associated companies and jointly controlled entities on the basis set out in note 5 and note 6 below respectively. The financial statements of the associated companies and jointly controlled entities used for this purpose are either co-terminus with the financial statements of the Company or cover a year ended not more than six months before the Company’s year- end. The results of subsidiaries, associated companies and jointly controlled entities acquired or disposed of during the year are included in the consolidated profit and loss account from the effective dates of acquisition or to the effective dates of disposal. All material intra-group transactions and balances are eliminated on consolidation.

Goodwill or capital reserve arising on acquisition of a subsidiary, an associated company or a jointly controlled entity, representing the excess or shortfall of the value of purchase consideration paid over the Group’s share of the fair value ascribed to separable net assets of the subsidiary, associated company or jointly controlled entity acquired at the date of acquisition, is eliminated against or credited to reserves immediately on acquisition. Upon disposal of a subsidiary, an associated company or a jointly controlled entity, the attributable amount of goodwill or capital reserve previously taken to reserves is transferred to profit and loss account in calculating the profit or loss on disposal.

Minority interests in the consolidated profit and loss account and balance sheet represents the interests of third parties outside the Group in the results and net assets of subsidiary companies.

A3 Principal Accounting Policies (cont’d)

2. 2. Turnover Turnover comprises proceeds from sale of properties (excluding proceeds on development properties sold prior to their completion which are included in deferred items), gross rental income from properties letting under operating leases, revenue from hotel operation, interest income earned, income from shares and other securities investments and revenue derived from other activities including property management, car parking and transport infrastructure management, construction, insurance and stock broking businesses. It does not include the turnover of associated companies and jointly controlled entities.

3. 3. Revenue recognition Revenue of a transaction is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group which will result in increases in equity and these benefits can be measured reliably, on the following basis:

(a) (a) Property sales Revenue and profit from sale of completed properties is recognised upon execution of the sale agreements.

When a development property is sold in advance of completion, revenue and profit is only recognised upon completion of the development. Deposits and instalments received from purchasers prior to this stage are included in deferred items.

Where properties are sold under deferred terms with part of the sales proceeds being receivable after an interest-free period, that portions of the differences between the sale prices with and without such terms representing finance income are treated as deferred income and is allocated to the profit and loss account on a basis that takes into account the effective yields on the amounts of the sales proceeds receivable over the interest-free period. A4 Principal Accounting Policies (cont’d)

3. 3. Revenue recognition (cont’d)

(b) (b) Rental income Rental income from properties letting under operating leases is recognised on a straight line basis over the lease terms.

(c) (c) Hotel operation Revenue from hotel operation is recognised upon provision of services.

(d) (d) Interest income Interest income is accrued on a time proportion basis that takes into account the effective yields on the carrying amount of assets.

(e) (e) Construction Revenue in respect of building construction job is recognised on the percentage of completion method measured by reference to the proportion that costs incurred to date bear to estimated total costs for the contract. Previously, revenue and profit in respect of building construction job was recognised only upon completion. The change in accounting policy has no material impact on the assets or profits of the Group for the current year and prior years.

(f) (f) Investment income Income from share and other investments is recognised when the right to receive payment is established.

(g) (g) Other income Property management service fee, car parking management fee, insurance premium and stock brokerage are recognised when the services are rendered. A5 Principal Accounting Policies (cont’d)

4. 4. Subsidiaries A subsidiary is a company in which the Group, directly or indirectly holds more than half of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors. Investments in subsidiaries are carried in the balance sheet of the Company at cost less provision for any permanent diminution in value.

5. 5. Associated companies Associated companies are those in which the Group has a long term equity interest of not less than 20% and not more than 50% and in which the Group is in a position to exercise significant influence, but not control or joint control, over the management, including participation in the financial and operating policy decisions.

Results of associated companies are incorporated in the consolidated profit and loss account to the extent of the Group’s share of post-acquisition profits less losses whereas accounted for in the profit and loss account of the Company only to the extent of dividend income.

Interests in associated companies are carried in the consolidated balance sheet at the Group’s share of their net assets whereas in the balance sheet of the Company at cost less provision for permanent diminution in value.

6. 6. Joint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and over which none of the parties has unilateral control.

A6 Principal Accounting Policies (cont’d)

6. 6. Joint ventures (cont’d) The Group has adopted the accounting policy for joint ventures in accordance with the statement of Standard Accounting Practice No. 21 “Accounting for interests in Joint Ventures” issued by the Hong Kong Society of Accountants which becomes effective from 1st January, 1998. Adoption of this accounting policy has no effect on the Group’s profit attributable to shareholders or reserves and only results in separate disclosures and reclassification of items in the financial statements. Comparative figures for the last year have been restated accordingly to conform with the current year’s presentation.

(a) (a) Jointly controlled entities Jointly controlled entities involve the establishment of a separate entity in which the Group has a long term interest and over which the Group is in a position to exercise joint control with other venturers in accordance with contractual arrangements.

Results of jointly controlled entities are incorporated in the consolidated profit and loss account to the extent of the Group’s share of post-acquisition profits less losses whereas accounted for in the profit and loss account of the Company only to the extent of dividend income.

Interests in jointly controlled entities in the consolidated balance sheet are initially recorded at cost and adjusted thereafter for post acquisition change in the Group’s share of their net assets whereas in the balance sheet of the Company are stated at cost less provision for permanent diminution in value.

A7 Principal Accounting Policies (cont’d)

6. 6. Joint ventures (cont’d)

(b) (b) Jointly controlled assets Jointly controlled assets are assets of a joint venture over which the Group has joint control with other venturers in accordance with contractual arrangements and through the joint control of which the Group has control over its share of future economic benefits earned from the assets.

The Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the balance sheets and classified according to their nature. Liabilities and expenses incurred directly in respect of its interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of the jointly controlled assets, together with its share of any expenses incurred by the joint ventures, are recognised in the profit and loss account when it is probable that the economic benefits associated the transactions will flow to or from the Group.

7. 7. Long term investments Long term investments are stated at cost less provision for permanent diminution in value. Results of long term investments are accounted for to the extent of dividends income.

A8 Principal Accounting Policies (cont’d)

8. 8. Properties

(a) (a) Land pending development Land pending development, which is stated at cost less provision for diminution in value made by the directors, is a suspense account that embraces all land acquired pending any positive intention whether to develop it for long term retention or for sale. When the intention is clear and action initiated, land to be developed for long term retention is reclassified as fixed assets and land to be developed for sale as current assets.

(b) (b) Investment properties Investment properties are completed properties which are income producing and held for their investment potential on a long term basis. Investment properties are included in fixed assets at open market value on the basis of an annual professional valuation related to properties on the basis that increases in valuations are credited to the investment property revaluation reserve and decreases in valuations are first set off against increases on earlier valuations on a portfolio basis and thereafter charged to operating profit. Upon disposal of an investment property, the revaluation surplus realised is transferred to operating profit in calculating the profit or loss on disposal.

(c) (c) Hotel properties Hotel properties and their integral fixed plant used in the operation of hotel are included in fixed assets at open market value on the basis of an annual professional valuation related to individual hotel properties.

A9 Principal Accounting Policies (cont’d)

8. 8. Properties (cont’d)

(d) (d) Properties under development Properties under development for long term retention are classified under fixed assets and are stated at cost less provision for diminution in value. These properties are reclassified as investment properties or other properties as the case may be upon completion of the development.

Properties under development for sale are included in stocks at the lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised and the anticipated costs to completion.

Cost of property in the course of development comprises land cost and development costs during the development period.

(e) (e) Stock of completed properties Completed properties remaining unsold at year end are stated at the lower of cost and net realisable value.

Cost is determined by apportionment of the total land and development costs attributable to the unsold properties.

Net realisable value is determined by reference to sale proceeds of properties sold in the ordinary course of business less all estimated selling expenses after the balance sheet date, or by management estimates based on prevailing market conditions.

A10 Principal Accounting Policies (cont’d)

8. 8. Properties (cont’d)

(f) (f) Other properties Other properties are properties held for production or administrative purposes and are included in fixed assets at cost less accumulated depreciation.

9. 9. Depreciation

(a) (a) Investment properties No depreciation is provided on investment property except where the unexpired term of the lease of the investment property is 20 years or less, in which case the then carrying amount is amortised on a straight line basis over the remaining unexpired term of the lease.

(b) (b) Hotel properties No depreciation is provided on hotel property or on its integral fixed plant. It is the Group’s policy to maintain these assets in a continual state of sound repair and maintenance and to extend and make improvements thereto from time to time, and accordingly the directors consider that given the estimated lives of these assets and their high residual values, any depreciation would be insignificant. The related repair and maintenance expenditure is charged to the profit and loss account in the year in which they are incurred. The costs of significant improvements are capitalised.

(c) (c) Properties under development No depreciation is provided on properties under development.

A11 Principal Accounting Policies (cont’d)

9. 9. Depreciation (cont’d)

(d) (d) Other properties The cost of leasehold land and construction cost of buildings thereon are depreciated on a straight line basis over the term of the lease.

(e) (e) Other fixed assets Other fixed assets including equipment, furniture, fixtures and vehicles are stated at cost less depreciation calculated on a straight line method to write off the assets over their estimated useful lives at rates ranging from 10% to 33.3% per annum.

10. 10. Capitalisation of borrowing costs Borrowing costs are expensed as incurred, except to the extent that they are capitalised as being directly attributable to the construction or production of assets which necessarily take a substantial period time to get ready for their intended use or sale. Capitalisation of such borrowing costs begins when construction or production activities commence and ceases when the assets are substantially ready for their intended use or sale.

11. 11. Materials and work-in-progress

(a) (a) Materials comprising mainly building materials and hotel stock are valued at cost, calculated on a weighted average cost basis, less provisions, if any.

(b) (b) Work-in-progress in respect of building construction jobs is stated at cost plus attributable profits recognised less provision for foreseeable losses and progress payments received and receivable. Cost includes direct materials, direct labour and attributable A12 overheads. Principal Accounting Policies (cont’d)

12. 12. Current assets and current liabilities

(a) (a) Current assets That portion of long term debtors which falls due within one year from the balance sheet date is included in current debtors. Marketable securities represent that part of liquid assets temporarily invested in shares and other investments and are stated at the lower of cost and market value.

(b) (b) Current liabilities That portion of long term liabilities which is repayable within one year from the balance sheet date is included in short term borrowings.

13. 13. Translation of foreign currencies Foreign currency transactions during the year are converted into Hong Kong dollars at the market rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies and financial statements of overseas subsidiaries, associated companies and jointly controlled entities expressed in foreign currencies are translated into Hong Kong dollars at the market rates of exchange ruling at the date of the balance sheet. Exchange differences arising from the translation of the financial statements of overseas subsidiaries, associated companies and jointly controlled entities are taken directly to reserves. All other exchange differences are dealt with in the profit and loss account.

14. 14. Deferred taxation Deferred taxation is provided, using the liability method, on all material timing differences other than those which are not expected to crystallise in the foreseeable future. Deferred tax asset is not recognised unless its realisation is certain.

A13 Principal Accounting Policies (cont’d)

15. 15. Related parties Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the other parties or exercise significant influence over the other parties in making financial and operating decisions, or vice versa, or where the Group and the parties are subject to common control or common significant influence.

16. 16. Financial instruments and derivatives

Interest rate swaps are used to manage the Group’s exposure to interest rate fluctuation. It is the Group’s policy not to enter into derivative transactions for speculative purposes. The notional amounts of interest rate swaps are recorded off balance sheet. Interest flows arising on the swaps are accounted for on an accrual basis.

A14 Consolidated Profit and Loss Account

For the year ended 30th June 1999 (Expressed in millions of Hong Kong dollars)

Note 1999 1998

Turnover 1 23,680 23,222

Operating profit 1 10,607 14,383 Interest expenses 2 (1,932) (2,180)

Net operating profit excluding exceptional items 8,675 12,203 Exceptional items 3 595 (4,700) Share of profits less losses of associated companies 447 598 Share of profits less losses of jointly controlled entities 432 710

Profit before taxation 4 10,149 8,811 Taxation 7 (867) (1,302)

Profit after taxation 9,282 7,509 Minority interests (4) (249)

Profit attributable to shareholders 8 9,278 7,260 Dividends 9 (3,721) (2,869)

Profit for the year retained 5,557 4,391

Profit for the year retained by: Company and subsidiaries 5,302 3,667 Associated companies 136 291 Jointly controlled entities 119 433

5,557 4,391

(Expressed in Hong Kong dollars)

Earnings per share 10 $3.87 $3.04

A15 Consolidated Balance Sheet

As at 30th June 1999 (Expressed in millions of Hong Kong dollars)

Note 1999 1998

Fixed assets 11 77,915 91,210 Associated companies 13 4,552 3,743 Jointly controlled entities 14 17,744 10,576 Long term investments 15 1,333 1,974 Secured loans 2,482 1,880 Land pending development 27,665 30,233

131,691 139,616

Current assets 16 28,137 28,620 Current liabilities 17 (19,620) (20,383)

Net current assets 8,517 8,237

140,208 147,853

Financed by: Share capital 18 1,201 1,196 Share premium and reserves 19 105,412 112,506

Shareholders’ funds 106,613 113,702 Long term liabilities 20 16,253 24,127 Minority interests 21 967 880 Deferred items 22 16,375 9,144

140,208 147,853

Directors: Walter P.S. Kwok Raymond P.L. Kwok

A16 Parent Company Balance Sheet

As at 30th June 1999 (Expressed in millions of Hong Kong dollars)

Note 1999 1998

Subsidiaries 12 30,579 31,293 Jointly controlled entities 14 (265) (302) Long term investments 15 (3) (1)

30,311 30,990

Current assets 16 72,298 60,405 Current liabilities 17 (31,536) (26,342)

Net current assets 40,762 34,063

71,073 65,053

Financed by : Share capital 18 1,201 1,196 Share premium and reserves 19 69,872 63,857

Shareholders’ funds 71,073 65,053

Directors: Walter P.S. Kwok Raymond P.L. Kwok

A17 Consolidated Cash Flow Statement

For the year ended 30th June 1999 (Expressed in millions of Hong Kong dollars)

Note 1999 1998

Net cash inflow from operating activities 23a 20,333 20,919

Returns on investments and servicing of finance Interest received 548 415 Interest paid (2,110) (2,737) Dividends received from listed investments 12 23 Dividends received from unlisted investments 1 46 Dividends received from associated companies and jointly controlled entities 485 406 Dividends and special cash bonus paid to shareholders (2,105) (6,193) Dividends paid to minority shareholders (59) (385) Net cash outflow from returns on investments and servicing of finance (3,228) (8,425) Taxation Hong Kong profits tax paid (1,396) (714) Hong Kong profits tax refund 102 – (1,294) (714) Investing activities Purchase of subsidiaries 23b – (316) Purchase of associated companies, jointly controlled entities and long term investments (157) (1,722) Repayment from/(Advances to) associated companies, jointly controlled entities and investee companies (7,408) 3,817 Acquisition of land pending development (2,268) (7,473) Additions to fixed assets (940) (2,656) Proceeds on disposal of investment properties 1,080 2,557 Proceeds on disposal of associated companies, jointly controlled entities and long term investment 968 121 Proceeds on disposal of other fixed assets 7 4 Proceeds on disposal of land pending development 127 – Loans and advances made (598) (295) Net cash outflow from investing activities (9,189) (5,963) Net cash inflow before financing 6,622 5,817 Financing

Bank loans 2,554 125 Other loans 3,173 – Repayment of bank and other loans (15,777) (3,760) Customers’ deposits and bills payable 685 529 Fundings from minority shareholders 202 30 Net cash outflow from financing 23c (9,163) (3,076) Increase/(Decrease) in cash and cash equivalents (2,541) 2,741 Cash and cash equivalents at beginning of year 10,734 7,993 Cash and cash equivalents at end of year 23d 8,193 10,734

A18 Notes to the Financial Statements

(Expressed in millions of Hong Kong dollars)

1. 1. Turnover and contribution to operating profit

An analysis of the Group’s turnover and contribution to operating profit before interest expenses, tax and minority interests by principal activities are as follows:

Turnover Operating Profit 1999 1998 1999 1998

Property sales 14,991 15,304 4,960 8,939 Rental income 5,510 5,650 4,203 4,443 Hotel operation 542 545 134 132 Interest income 543 435 543 434 Other income 2,094 1,288 767 435

Total 23,680 23,222 10,607 14,383

Other income comprises revenue and profit derived from other activities including property management, car parking and transport infrastructure management, construction, securities investments, insurance and stock broking.

2. 2. Interest expenses

1999 1998

Interest on Bank loans and overdrafts 1,191 1,730 Other loans wholly repayable within 5 years 935 1,080

2,126 2,810 Less: Portion capitalised 194 630

1,932 2,180

3. 3. Exceptional items

1999 1998

Profit on deemed disposal of investment in an associated company 595 – Provision for diminution in value of interest in property development projects – (4,300) Provision for diminution in value of long term investments – (400) 595 (4,700)

Profit on deemed disposal of investment in an associated company represents the increase in the Group’s share of the net assets in Smartone Telecommunications Holdings Limited arising from the Group’s reduction in its shareholdings from 33.27% to 26.43% as a result of its new share issues during the year. 33.27 26.43

A19 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

4. 4. Profit before taxation 1999 1998

Profit before taxation is arrived at after charging: Depreciation 228 83 Auditors’ remuneration 5 5 Directors’ emoluments 33 45

and crediting: Dividend income from: listed investments 12 23 unlisted investments 1 46 Profit on disposal of long term investment 192 62

5. 5. Directors’ emoluments and five highest paid individuals

1999 1998

Directors’ emoluments: Fees 1 1 Salaries, allowances and benefits in kind 15 15 Bonuses 16 28 Provident fund contributions 1 1

33 45

Fees paid to independent non-executive directors amounted to $210,000 (1998: $170,000). 1998 There were no other emoluments paid to non-executive directors.

Number of directors whose emoluments fell within:

Emoluments Band Number Number

HK$M HK$M 0 – 1.0 7 6 1.0 – 1.5 – 1 1.5 – 2.0 3 2 2.0 – 2.5 – 1 3.0 – 3.5 – – 3.5 – 4.0 1 – 4.5 – 5.0 – 1 5.0 – 5.5 1 – 6.0 – 6.5 – 2 6.5 – 7.0 1 – 10.5 – 11.0 1 – 19.5 – 20.0 – 1

14 14

The above analysis includes four (1998: four) individuals whose emoluments were among 1998 the five highest in the Group. Details of the emoluments paid to the other one (1998: one) 1998 individual are:

1999 1998

Salaries, allowances and benefits in kind 7 4 Bonuses 1 1 Provident fund contributions – – A20 8 5 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

6. 6. Staff retirement schemes

The Group operates a number of defined contribution schemes for all qualified employees. The assets of these schemes are held separately from those of the Group in independently administered funds. Contributions to these schemes are made by both the employers and employees at rates ranging from 5% to 10% on the employees’ salary.

Contributions to the retirement schemes made by the Group during the year amounted to 1998 $90 million (1998: $81 million) of which $51 million (1998: $47 million) was charged to the profit and loss account. Forfeited contributions for the year of $13 million (1998: $10 1998 million) were used to reduce the existing level of contributions.

1998

7. 7. Taxation

1999 1998

Hong Kong Company and subsidiaries 728 1,131 Associated companies 44 46 Jointly controlled entities 91 107

863 1,284 Outside Hong Kong Jointly controlled entities 4 18

867 1,302

(a) (a) Hong Kong profits tax is provided at the rate of 16% (1998: 16%) based on the 16% 1998 16% estimated assessable profits for the year and included a 10% rebate of profit tax in the amount of $102 million for the year of assessment 1997/98. Tax outside Hong Kong is 10% calculated at rate applicable in the relevant jurisdiction.

(b) (b) No provision for deferred taxation has been made as the aggregate effect of all timing differences is immaterial.

(c) (c) The surplus arising on revaluation of investment properties and hotel properties held by the Group and its jointly controlled entities does not constitute a timing difference as profit arising on the disposal of these assets would not be subjected to taxation. Accordingly, no deferred taxation has been provided.

8. 8. Profit attributable to shareholders

Profit attributable to shareholders dealt with in the profit and loss account of the Company 1998 amounts to $9,211 million (1998: $11,576 million).

A21 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

9. 9. Dividends

1999 1998

Interim dividend of $0.50 per share based on 2,401 million shares 1998 (1998: $0.60 per share based on 2,389 million shares) paid 1,200 1,434

Proposed final dividend of $1.05 per share based on 2,401 million shares 1998 (1998: $0.6 per share based on 2,391 million shares) 2,521 1,435

3,721 2,869

10. 10.Earnings per share

The calculation of earnings per share is based on $9,278 million (1998: $7,260 million) 1998 being profit attributable to shareholders and on weighted average number of 2,397 million shares (1998: 2,390 million shares) in issue during the year. 1998

A22 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

11. 11.Fixed assets

Properties Investment Hotel under Other Other The Group properties properties development properties fixed assets Total

(a) (a) Movement during year Cost or valuation At beginning of year 80,433 4,200 6,345 – 570 91,548 Additions 96 1 978 – 59 1,134 Transfer in 3,357 – 154 1,303 601 5,415 Disposals (1,396 ) – (1,501 ) – (17 ) (2,914 ) Transfer out (36 ) (353 ) (4,126 ) ––(4,515 ) Revaluation deficit (11,899 ) (298 ) –––(12,197 )

At end of year 70,555 3,550 1,850 1,303 1,213 78,471 Accumulated depreciation At beginning of year ––––338 338 Charge for the year –––76 152 228 Disposals ––––(10 ) (10 )

At end of year –––76 480 556

Net book value at 30/6/1999 70,555 3,550 1,850 1,227 733 77,915

Net book value at 30/6/1998 80,433 4,200 6,345 – 232 91,210

(b) (b) Basis of book value 1999 professional valuation 70,555 3,550 –––74,105 Cost ––1,850 1,303 1,213 4,366 70,555 3,550 1,850 1,303 1,213 78,471

(c) (c) Net book value of properties shown above comprises:

1999 1998

Land in Hong Kong held under Long Lease (not less than 50 years) Investment properties 17,577 23,311 Hotel properties 1,120 1,360 Properties under development 190 477 Other properties 16 –

18,903 25,148

Medium-term lease (less than 50 years but not less than 10 years) Investment properties 52,311 57,122 Hotel properties 2,430 2,840 Properties under development 1,563 5,868 Other properties 1,211 –

57,515 65,830

Land outside Hong Kong held under Long Lease (not less than 50 years) Investment properties 667 – Properties under development 97 – 764 – 77,182 90,978 A23 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

11. 11.Fixed assets (cont’d)

(d) (d) Investment properties and hotel properties revaluation

The Group’s investment properties and hotel properties have been revalued as at 30th June, 1999 by Messrs. Knight Frank, Chartered Surveyors on an open market value basis in their existing state by reference to comparable market transactions and where appropriate on the basis of capitalisation of the net income allowing for reversionary income potential.

(e) (e) Gross rental receivable from and profit on disposal of the Group’s investment properties during the year amounted to HK$5,114 million (1998: HK$5,221 million) 1998 and HK$439 million (1998: HK$2,054 million) respectively.

1998

(f) (f) The carrying amount of properties under development as at 30th June 1999 included interest capitalised in the amount of HK$639 million (1998: HK$674 million).

1998

12. 12.Subsidiaries

1999 1998

The Company Unlisted shares, at cost 30,579 31,293

A35 Particulars regarding principal subsidiaries are set out on pages A35 to A44. A44

13. 13.Associated companies

1999 1998

The The The The Group Company Group Company

Unlisted shares, at cost less provision 169 – 191 – Hong Kong listed shares, at cost 628 – 620 – Share of post-acquisition reserves 1,995 – 1,277 –

2,792 – 2,088 – Goodwill on acquisition of associated companies eliminated (107) – (107) – Share of net assets 2,685 – 1,981 – Amount due from associated companies 1,890 – 1,781 – Amount due to associated companies (23) – (19) – 4,552 – 3,743 –

Market value of Hong Kong listed shares 6,528 4,668

A24 A48 Particulars regarding principal associated companies are set out on page A48. Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

14. 14.Jointly controlled entities

1999 1998

The The The The Group Company Group Company

Unlisted shares, at cost less provision 1,727 4 1,655 4 Share of post-acquisition reserves 2,844 – 3,003 –

4,571 4 4,658 4 Goodwill on acqusition of jointly controlled entities eliminated (122) – (122) –

Share of net assets 4,449 4 4,536 4 Amount due from jointly controlled entities 14,500 1 6,881 – Amount due to jointly controlled entities (1,205) (270) (841) (306)

17,744 (265) 10,576 (302)

Particulars regarding principal jointly controlled entities are set out on pages A45 to A47. A45 A47

15. 15.Long term investments

1999 1998

Note The The The The Group Company Group Company

Unlisted shares, at cost less provision 353 – 275 – Hong Kong listed shares, at cost less provision 926 – 1,693 –

1,279 – 1,968 – Amount due from investee companies 89 – 44 – Amount due to investee companies (35) (3) (38) (1)

1,333 (3) 1,974 (1)

Market value of Hong Kong listed shares 1,527 – 2,095 –

16. 16.Current assets

Stocks 16(a) 16,144 – 13,969 – Debtors 16(b) 3,458 72,294 3,621 60,405 Marketable securities 16(c) 287 – 239 – Short term bank deposits 8,082 – 10,658 – Bank balances and cash 166 4 133 – 28,137 72,298 28,620 60,405

A25 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

16. 16.Current assets (cont’d)

1999 1998

Note The The The The Group Company Group Company (16a) (16a) Stocks

Properties under development 11,570 – 11,266 – Stock of completed properties for sale 4,466 – 2,593 – Work-in-progress less receipts on account 52 – 29 – Materials 56 – 81 – 16,144 – 13,969 –

The carrying amount of the above stocks that are stated at net realisable value amounted to $765 million (1998: $310 million). 1998

(16b) (16b) Debtors Debtors, deposits and prepayments 3,094 261 3,253 266 Short term loans 364 – 368 – Amounts due from subsidiaries less provision – 72,033 – 60,139 3,458 72,294 3,621 60,405

(16c) (16c) Marketable securities Hong Kong listed shares and investments 96 – 139 – Overseas shares and investments 191 – 100 – 287 – 239 –

Market value Hong Kong listed shares and investments 167 – 187 – Overseas shares and investments 216 – 100 –

383 – 287 –

17. 17.Current liabilities 1999 1998

Note The The The The Group Company Group Company

Short term borrowings 17(a) 4,781 – 6,959 9 Customers’ deposits and bills payable 2,658 – 1,973 – Creditors 17(b) 6,379 29,015 6,169 24,898 Taxation 3,281 – 3,847 – Proposed final dividend 2,521 2,521 1,435 1,435 A26 19,620 31,536 20,383 26,342 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

17. 17.Current liabilities (cont’d)

1999 1998

Note The The The The Group Company Group Company

(17a) (17a) Short term borrowings

Unsecured bank loans and overdrafts 95 – 72 9 Long term liabilities due within 1 year 20 4,686 – 6,887 – 4,781 – 6,959 9

(17b) (17b) Creditors

Creditors and accrued expenses 6,379 213 6,169 179 Amounts due to subsidiaries – 28,802 – 24,719

6,379 29,015 6,169 24,898

18. 18.Share capital

Number of shares in millions Amount

Authorised: Ordinary shares of $0.50 each At beginning and end of year 2,900 1,450

Issued and fully paid: Ordinary shares of $0.50 each At beginning of year 2,391 1,196 Shares issued in lieu of cash dividends 10 5

At end of year 2,401 1,201

On 15th December, 1998, 9,517,496 shares were issued as fully paid shares in lieu of final dividends for the year ended 30th June, 1998, at a value of $55.65. An amount of $5 million standing to the credit of the share premium account was applied in paying up the shares.

A27 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

19. 19.Share premium and reserves

1999

The The Group Company

Share premium At beginning of year 17,005 17,005 Amount applied in paying up shares issued in lieu of cash dividends (5) (5) At end of year 17,000 17,000

Capital reserve At beginning and end of year 727 5,281

Property revaluation reserves At beginning of year 55,351 –

Deficit on revaluation of properties held by subsidiaries attributable to the Group - Investment properties (11,839) – - Hotel properties (298) –

Surplus realised on disposal of investment properties held by –Subsidiaries (755) – –Jointly controlled entities (26) –

Share of deficit on revaluation of investment properties held by jointly controlled entities (239) –

At end of year 42,194 –

Building reserve at beginning and end of year 830 830

Dividend equalization reserve at beginning and end of year 350 350

General reserve at beginning and end of year 5 –

Exchange reserve At beginning of year (2) – Exchange difference arising on translation of financial statements of –Subsidiaries 7 – –Associated companies (1) – –Jointly controlled entities (13) – At end of year (9) –

Retained profits At beginning of year 38,240 40,391 Goodwill adjustment on acquisition of a subsidiary by an associated company in prior year (12) – Arising on shares issued in lieu of cash dividends 530 530 Profit for the year retained 5,557 5,490

At end of year 44,315 46,411

Total share premium and reserves 105,412 69,872

Distributable reserves of the Company as at 30th June, 1999 amounted to $47,591 million (1998: $41,571 million). 1998 A28 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

19. 19.Share premium and reserves (cont’d)

1999 1998

The Company Associated Jointly The Company Associated Jointly and subsidiaries companies controlled entities and subsidiaries companies controlled entities

Share premium and reserves of the Group retained by:

Share premium 17,000 – – 17,005 – – Capital reserve 704 23 – 704 23 – Investment property revaluation reserve 39,940 – 1,721 52,534 – 1,986 Hotel property revaluation reserve 533 – – 831 – – Building reserve 830 – – 830 – – Dividend equalisation reserve 350 – – 350 – – General reserve –5––5– Exchange reserve 5 (1 ) (13 ) (2 ) – – Retained profits 42,198 982 1,135 36,366 857 1,017 101,560 1,009 2,843 108,618 885 3,003

20. 20.Long term liabilities

Note 1999 1998

The Group

Unsecured bank loans repayable

Within 1 year 1,664 1,667 After 1 year, but within 2 years 894 2,286 After 2 years, but within 5 years 11,003 15,538 After 5 years 533 2,628

14,094 22,119 Other unsecured loans repayable

Within 1 year 3,022 5,220 After 1 year but within 2 years 2,450 3,022 After 2 years, but within 5 years 675 653 After 5 years 698 –

6,845 8,895 20,939 31,014 Less : Amount due within 1 year included in short term borrowings 17(a) (4,686) (6,887)

16,253 24,127

(a) (a) The above other unsecured loans are repayable on various dates up to 30th June, 2006 at commercial market rates.

(b) (b) Bank loans shown above that are not wholly repayable within 5 years amounted to 1998 $1,100 million (1998: $9,543 million).

A29 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

21. 21.Minority interests

1999 1998

The Group Share of equity and reserves in subsidiaries 107 222 Amount due to minority shareholders 874 674 Amount due from minority shareholders (14) (16) 967 880

22. 22.Deferred items

The Group Deposits received on sale of properties 16,271 9,038 Deferred income 104 106 16,375 9,144

23. 23.Notes to consolidated cash flow statement

(a) (a) Reconciliation of operating profit to net cash inflow from operating activities

Operating profit 10,607 14,383 Depreciation 228 83 Profit on disposal of investment properties (439) (2,054) Loss on disposal of fixed assets – 4 Profit on disposal of long term investment (192) (62) Profit on disposal of land pending development (50) – Dividends received from investments (13) (69) Provision for diminution of associated company 22 – Interest income (543) (435) Decrease/(Increase) in stocks 3,219 (370) Decrease in debtors 117 1,743 Decrease/(Increase) in marketable securities (48) 225 Increase/(Decrease) in creditors 194 (427) Increase in deferred items 7,231 7,898

Net cash inflow from operating activities 20,333 20,919

A30 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

23. 23.Notes to consolidated cash flow statement (cont’d)

1999 1998

(b) (b)Purchase of subsidiaries

Net assets acquired: Fixed assets – 42 Land pending development – 404 Bank balance and cash – 84 Debtors – 75 Creditors – (128) Taxation – (1) Minority interests – (47) Goodwill on acquisition – 30

– 459

Consideration satisfied by: Cash paid – 400 Interest in jointly controlled entities – 59

– 459

Analysis of net cash outflow of cash and cash equivalents in respect of the purchase of subsidiaries: Cash consideration paid – 400 Bank balances and cash acquired – (84) – 316

(c) (c) Analysis of changes in financing during the year

Long term Share liabilities Customers’ capital and deposits and share short term Minority and bills premium borrowings interests payable Total

At beginning of year 18,201 31,029 880 1,973 52,083 Net cash inflow/ (outflow) from financing – (10,050) 202 685 (9,163) Minority interests in – profits ––4 – 4 – investment property revaluation reserve ––(60) – (60) Dividends paid to minority shareholders ––(59) – (59)

At end of year 18,201 20,979 967 2,658 42,805

A31 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

23. 23.Notes to consolidated cash flow statement (cont’d)

(d) (d) Analysis of the balances of cash and cash equivalents at end of year

1999 1998

Short term bank deposits 8,082 10,658 Cash and bank balances 166 133 Bank overdrafts (55) (57)

8,193 10,734

24. 24.Jointly controlled assets

At the date of the balance sheet, the aggregate amounts of assets and liabilites recognised in the financial statements relating to the Group’s interests in jointly controlled assets are as follows:

1999 1998

The The The The Group Company Group Company

Investment properties 5,540 – 6,773 – Land pending development 70 – 71 – Stock of completed properties for sale 58 – 58 –

5,668 – 6,902 –

Creditors and accrued expenses 97 – 110 –

25. 25.Related party transactions

During the year, the Group undertook various transactions with related parties for provision of finance, lease of premises, purchasing of goods and rendering of certain services related to property construction, management and marketing activities. The following is a summary of significant transactions between the Group and related parties, which were carried out in the ordinary course of the Group’s business and on normal commercial terms:

Associated Jointly companies controlled entities

Interest income 152 305 Rental income 69 3 Other revenue for services rendered 184 223 Purchase of goods and services – 355

No comparative information for prior year is available as Statement of Standard Accounting Practice 20 “Related Party Disclosure” is first adopted in preparing these accounts.

The outstanding balances with associated companies and jointly controlled entities at the 13 14 balance sheet date were disclosed in Notes (13) and (14).

A32 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

26. 26.Contingent liabilities and commitments

The Group

At the date of the balance sheet, the Group had contingent liabilities and commitments, so far as not provided for in the consolidated financial statements, as follows:

1999 1998

(a) (a) Capital commitments contracted for in respect of fixed assets 1,454 1,056

(b) (b) Capital commitments for invetments in joint ventures: Contracted but not provided for 304 –

(c) (c) Group’s share of capital commitments of joint ventures: Contracted but not provided for 326 1,303 Authorised but not contracted for 1,151 –

(d) (d) Guarantees given to banks and financial institutions in respect of facilities drawn by an associated company and jointly controlled entities amounting to approximately $1,632 million (1998: $1,546 million) and $5,488 million (1998: $7,443 million) respectively.

1998 1998

The Company

At the date of the balance sheet, the Company had contingent liabilities, not included in the Company’s financial statements, in respect of guarantees for bank and other borrowings drawn by:

1999 1998

Subsidiaries 21,000 31,086 Associated company 1,632 1,546 Jointly controlled entities 5,488 7,443 28,120 40,075

A33 Notes to the Financial Statements (cont’d)

(Expressed in millions of Hong Kong dollars)

27. 27.Financial instruments

From time to time the Group enters into interest rate swaps to adjust interest rate exposures on its debt portfolio. The Group does not undertake speculative trading in these instruments. At the balance sheet date, the Group has a net interest rate swap position of receive fixed and the gross notional principal of interest rate swaps was HK$2,575 million. Details of the Group’s outstanding interest rate swaps at balance sheet date were as follows:

Net notional principal Net Carrying amount fair value value Interest rate swaps – Less than one year (100) (5) – – One to five years 2,475 108 6

2,375 103 6

Counterparties to swap transactions are reputable international financial institutions with strong credit ratings. The Group has established treasury policies and control procedures to assess and monitor the counterparty limits and exposure. The Group does not consider that it has any significant exposure to any individual counterparty, nor does it anticipate non- performance by any of its counterparties.

28. 28.Comparative figures

Certain comparative figures have been reclassified to conform with current year’s presentation.

29. 29.Approval of financial statements

A3 A48 The financial statements set out on pages A3 to A48 were approved by the board of directors on 7th October, 1999.

A34 Principal Subsidiaries

The directors are of the opinion that a complete list of the particulars of all subsidiaries will be of excessive length and therefore the list following contains only the particulars of subsidiaries which principally affect the profit and loss account or assets of the Group. A complete list of all the subsidiaries will be annexed to the Company’s 1999 annual return.

Unless otherwise stated, all principal subsidiaries are incorporated and operating in Hong Kong and unlisted.

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Sun Hung Kai Real Estate 100 100 General 1,000,000 Agency Limited management & agency

New Town (N.T.) Properties 11.7 100 Investment 2,287,659,338 Limited holding

Hung Kai Finance Company 100 100 Registered 100,000,200 Limited deposit-taking company

Fidelity Finance Company Limited 100 100 Finance 200

Honour Finance Company Limited 100 100 Finance 500,000

Sun Hung Kai Properties 100 100 Finance 100,000 (Financial Services) Limited

Sun Hung Kai Properties 100 100 General insurance 75,000,000 Insurance Limited

Honour Securities Company 100 Share broking 6,000,000 Limited

Sun Hung Kai Engineering 100 100 Architectural & 350,000 Company Limited engineering

Sanfield Building Contractors 100 100 Building 2,500,000 Limited construction

A35 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Everlight Engineering Company 100 Fire prevention 50,000 Limited & mechanical engineering

Aegis Engineering Company 100 Plant and 100,000 Limited machine hire

Hong Yip Service Company 100 100 Property 100,000 Limited management

Kai Shing Management Services 100 100 Property 10,000 Limited management

Mantegna Investment Mantegna Investment Company 1 100 Hotel ownership 10,000,000 Company Limited Limited

New Town Serviced Apartment 100 Furnished apartment 200 Management Company Limited management

Royaltelle International Limited 100 Hotel management 2

Additech Ltd. Additech Ltd. 1 100 Property investment US$1

Addpower Properties Addpower Properties Limited 1 100 Property investment US$l Limited

Airport Freight Forwarding Centre 65 Freight forwarding 100 Company Limited centre

Amglo Master Ltd. Amglo Master Ltd. 1 100 Property investment US$1

Antanpark Limited Antanpark Limited 1 100 Property investment US$1

Antinio Investments Antinio Investments Limited 1 100 Property investment US$1 Limited

Ao Ta Development Company 50 100 Property investment 200 Limited

Artsland Properties Artsland Properties Investment 1 100 Property investment US$1 Investment Ltd. Ltd.

Barnard Enterprises Barnard Enterprises Limited 1 75 Property investment US$100 Limited

Beauty Marble Beauty Marble Investment 100 Property investment 2 A36 Investment Limited Limited Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Biliboss Limited Biliboss Limited 1 100 Property investment US$1

Biliwide Limited 100 Property development 20

Billion Mix Limited Billion Mix Limited 100 Property investment 2

Borracho Company Borracho Company Limited 100 Property investment 200 Limited

Branhall Investments Branhall Investments Limited 1 100 Property investment 40,000,000 Limited

Cheerwide Properties Cheerwide Properties Limited 1 100 Property development US$1 Limited

Cherry Land Cherry Land Company Limited 100 Property development 1,500,000 Company Limited and investment

Country Well (Hong Kong) 1 100 Property investment 2 Limited

Deluxe Plan Enterprises Limited 100 Property investment 2

Deporte Ltd. Deporte Ltd. 1 100 Property investment US$1

Deveaux Investments Deveaux Investments Limited 1 100 Property investment 270,000,000 Limited and share dealing

Dictado Company Dictado Company Limited 100 Property investment 200 Limited

Dipende Limited Dipende Limited 1 100 Property investment US$1

Donora Company Donora Company Limited 50 100 Property development, 2 Limited share investment and dealing

Earning Mode Limited 100 Property development 2

Eastlight Limited Eastlight Limited 1 100 Property development US$l

Entero Company Entero Company Limited 50 100 Property investment 200 Limited

Ever Channel Limited Ever Channel Limited 100 Property investment 2

A37 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Far Fortune Investment Limited 100 Property investment 2

Firstmax Limited Firstmax Limited 100 Property investment 2

Forever Glory Forever Glory Investments 1 100 Property investment US$1 Investments Limited Limited

Fortune Honor Limited 100 Property investment 2

Fortune Yield Fortune Yield Investment Limited 100 Property investment 2 Investment Limited

Fronta Limited Fronta Limited 100 Property investment 3

Full Market Limited Full Market Limited 100 Property investment 2

Garudia Limited 100 Property investment 2

Getherich Ltd. Getherich Ltd. 1 100 Property investment US$1

Gleamland Limited Gleamland Limited 1 100 Property investment US$1

Golden Square Golden Square Properties 1 100 Property investment 1,000,000 Properties Enterprises Limited Enterprises Limited

Goldland Limited Goldland Limited 1 100 Property investment US$l

Goodfaith Limited Goodfaith Limited 1 100 Property development US$1

Goodteam Limited 100 Property investment 2

Gracious Reputation Gracious Reputation Limited 100 Property investment 20 Limited

Grand Kosky Ltd. Grand Kosky Ltd. 1 100 Property investment US$1

Groupland Ltd. Groupland Ltd. 1 100 Property investment US$1

Grumete Company Grumete Company Limited 50 100 Property development 200 Limited

Harsco Limited 100 Property development 2

Henca Limited Henca Limited 1 100 Property investment US$1

Hitch Gato Company Hitch Gato Company Limited 100 Property development 2 A38 Limited and investment Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Honenberg Limited Honenberg Limited 100 Property investment 2

Honfair Properties Honfair Properties Limited 1 100 Property development US$1 Limited

Honour Futures Limited 100 Commodities dealing 7,000,000

Hopley International Hopley International Limited 1 100 Property investment US$1 Limited

Hong Kong Business Hong Kong Business 4 35 35 Business Aviation 1,000,000 Aviation Centre Aviation Centre Centre Limited Limited

Hung Kai Finance Investment 100 Property investment 200 Holding Limited

Jenreal Investments Limited 100 Property development 2

Jugada Company Jugada Company Limited 100 Property investment 2 Limited

Kamchatka Company Kamchatka Company Limited 100 Property investment 200 Limited

Kartasun Limited Kartasun Limited 100 Property investment 2

Kimrose Investments Kimrose Investments Ltd. 1 100 Property investment US$1 Ltd.

King Star Estate Limited 99.9 Property development 10,000

Laboster Company Limited 50 100 Property investment 2

Lee Bit Kai Investment Company 100 100 Property investment 1,000 Limited

Light Time Investments Limited 100 Property development 2 and investment

Little Jewel Limited Little Jewel Limited 1 100 Property development US$1

Long Tesak Company Long Tesak Company Limited 100 Property investment 100,000 Limited

Lonsale Company Lonsale Company Limited 100 Property investment 2 Limited A39 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Lorient Holdings Ltd. Lorient Holdings Ltd. 1 100 Property investment US$1

Lunalite Company Lunalite Company Limited 100 Property development 2 Limited and investment

Luxsky Ltd. Luxsky Ltd. 1 100 Property investment US$1

Main Global Limited Main Global Limited 100 Property investment 2

Manceton Limited Manceton Limited 100 Property investment 2

Manmouth Limited 100 Property development 2

Meloworld Limited 100 Investment holding 2 and property investment

Merit Success Merit Success Company Limited 100 Property investment 2 Company Limited

Mindano Limited Mindano Limited 100 Property investment 10,000

Morifund Ltd. Morifund Ltd. 1 100 Property investment US$1

Moscova Company Moscova Company Limited 50 100 Property investment 200 Limited

Moristrong Limited Moristrong Limited 1 100 Property investment US$1

Navipol Company Navipol Company Limited 100 Property investment 200 Limited

Nixon Cleaning Company Limited 100 Cleaning service 100,000

Obvio Yip Company Obvio Yip Company Limited 50 100 Property development 200 Limited and investment

Open Step Limited 60 Property investment 10

Oriental Eagle Oriental Eagle 100 Property investment 2 Enterprises Limited Enterprises Limited

Pacotilla Company Pacotilla Company Limited 100 Property investment 200 Limited

A40 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Pako Shun Limited Pako Shun Limited 100 Property investment 2

Parico Fortune Ltd. Parico Fortune Ltd. 1 100 Property investment US$1

Peach Blossom Peach Blossom 1 100 Property investment US$1 Company Limited Company Limited

Perry Holdings Perry Holdings Limited 1 100 Property investment 500,000,000 Limited

Pogarlic Company Pogarlic Company Limited 66.7 100 Property investment 3 Limited

Ponente Company Ponente Company Limited 100 Property investment 200 Limited

Prelong Limited 100 Property development 2 and investment

Profit Richness Limited Profit Richness Limited 1 100 Property investment US$1

Protasan Limited Protasan Limited 100 Property investment 100

Rainforce Limited 100 Property development 2

SHK (N.T.) Shopping SHK (N.T.) Shopping Limited 100 Property investment 2 Limited

SHK Sheung Shui SHK Sheung Shui Landmark 100 Property investment 200 Landmark Investment Limited Investment Limited

Shubbery Company Shubbery Company Limited 100 Property investment 200 Limited

Speed Fellow Limited 100 Property investment 2

Speed Wise Limited Speed Wise Limited 100 Property investment 2

Splendid Kent Limited Splendid Kent Limited 100 Property development 4

Standard Top Limited Standard Top Limited 100 Property investment 2

Startrack Company Startrack Company Limited 100 Property investment 200 Limited

A41 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Sun Carol Company Sun Carol Company Limited 100 Property investment 200 Limited

Sun Hung Kai China Trading 100 Property investment 2 Limited

Sun Hung Kai Properties Sun Hung Kai Properties 100 Property investment 2 Consultants Limited Consultants Limited

Sun Hung Kai Properties Sun Hung Kai Properties 100 Property investment 2 Pacific Limited Pacific Limited

Sun Hung Kai Real Sun Hung Kai Real Estate 100 Property investment 2 Estate Consultants Consultants Limited Limited

Sun Hung Kai Secretarial Services 50 100 Secretarial services 200 Limited

Sun Technology Services 100 Satellite television 2 Limited services

Sun Yuen Long Centre Management 87.5 Property investment 50,000 Company Limited and management

Sunfez Company Sunfez Company Limited 100 Property investment 200 Limited

Sunrit Enterprises Limited 100 Property investment 4,000,000

Super Bold Limited Super Bold Limited 100 Property investment 10,000

Super Sun Limited 100 Property development 2

Supreme Ford Limited 100 Property development 2

Tainam Holdings Limited Tainam Holdings Limited 1 100 Property investment US$1

Ten Choice Development Limited 100 Property investment 2

Tinosan Limited Tinosan Limited 100 Property investment 2

Tipro Development Tipro Development Limited 99.2 Property investment 1,000,000 Limited

A42 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Tonthai Investment Tonthai Investment Enterprises 1 100 Property investment US$1 Enterprises Limited Limited

Town Descant Town Descant Company Limited 100 Property investment 200 Company Limited

Town Fierce Town Fierce Company Limited 100 Property investment 10,000 Company Limited

Tsi Mai Company Tsi Mai Company Limited 100 Property investment 200 Limited

Tsing Ma Management Limited 66.7 Road management 70,000,000

Tyranny Company Tyranny Company Limited 75 100 Property development 400 Limited and investment

Uniland Investment Uniland Investment Enterprises 1 100 Property investment US$1 Enterprises Limited Limited

Upper Hill Company Upper Hill Company Limited 1 100 Property investment US$1 Limited

Vergoda Company Vergoda Company Limited 66.7 100 Property development 3 Limited and investment

Victory Force Limited Victory Force Limited 100 Property investment 2

Victory Winner Limited 100 Property investment 2

Vimson Limited Vimson Limited 1 100 Property investment US$1

Virile Investment Virile Investment Enterprises 1 100 Property investment US$1 Enterprises Limited Limited

Wai Hung Development Company 85.7 100 Investment holding 70,000 Limited and property investment

Warrior Company Warrior Company Limited 100 Property investment 300 Limited

Weelek Company Limited 100 Property investment 200

A43 Principal Subsidiaries (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities Issued Capital

(HK$)

Well Logic Properties Well Logic Properties 1 100 Property investment US$1 Investment Limited Investment Limited Well Logic (Formerly Well Logic Investment Investment Enterprises Limited) Enterprises Limited

Wellden Limited Wellden Limited 100 Property investment 2

Wilson Parking (Hong Kong) 100 Car park operation 100,000 Limited

Wisearn Properties Wisearn Properties Investment 1 100 Property investment US$1 Investment Limited Limited

World Trade Tower World Trade Tower Limited 100 Property investment 100,000 Limited

WTC (Club) Limited WTC (Club) Limited 100 Club management 200

Wylproud Company Wylproud Company Limited 50 100 Property investment 2 Limited

Wymount Limited Wymount Limited 100 Property investment 2

Yancon Limited 100 Property investment 2

Yiu Kon Limited 100 Property development 2

Zarabanda Company Zarabanda Company Limited 100 Property investment 2 Limited

Zindemar Investments Zindemar Investments Corp. 3 100 100 Property development US$2 Corp.

Notes:

1. 1. Incorporated in British Virgin Islands.

2. 2. Incorporated in Liberia.

3. 3. Incorporated in Panama.

4. 4. Indirectly held by the Company and the Group. A44 Principal Jointly Controlled Entities

The directors are of the opinion that a complete list of the particulars of all jointly controlled entities will be of excessive length and therefore the list following contains only the particulars of jointly controlled entities which principally affect the profit and loss account or assets of the Group. A complete list of all jointly controlled entities will be annexed to the Company’s 1999 annual return.

Unless otherwise stated, all principal jointly controlled entities are incorporated and operating in Hong Kong and unlisted.

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities

Altomatic Limited Altomatic Limited 50 Property investment

Anbok Limited 25 Property development

Arrowtown Assets Arrowtown Assets Limited 1 49 Property development Limited

Asia Container Asia Container Terminals Limited 28.5 Container terminals Terminals Ltd. development

# Beijing New Dong An 50 Property investment Company Limited

Central Waterfront Central Waterfront Property 1 47.5 Property development Property Development Development Limited Limited

# Direct Profit Development Direct Profit Development 8 Property development Limited Limited

#+ Faith & Safe Transportation 50 Mid stream operator Limited

Glorious Concrete (H.K.) 50 Manufacturers of Limited ready mixed concrete

# Goodwill Financial Services 30 Financial services (Holding) Limited A45 #+ Green Valley Landfill Limited 20 Landfill waste disposal facility Principal Jointly Controlled Entities (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities

#+ Hoi Kong Container Services 50 Mid stream operator Company Limited

#+ Hong Kong Parking Limited 50 Parking meters operator

# Kerry Hung Kai Godown 50 Godown operation Limited

+ Mightypattern Limited Mightypattern Limited 25 25 Investment holding

# Moricrown Limited Moricrown Limited 7 Property development

+ New-Alliance Asset 50 Investment Management (Asia) Limited management services

+ Newfoundworld Newfoundworld Holdings 20 Property development Holdings Limited Limited and investment

#+ Pearl Delta WMI Limited 20 Solid waste management and environmental services

# Route 3 (CPS) Company 50 Toll road operation Limited

Senica International Senica International Limited 22.5 Investment holding Limited

#+ South China WMI Transfer 20 Solid waste Limited management and environmental services

Splendid Shing Limited Splendid Shing Limited 50 Property investment

+ Star Play Development 33.3 Property investment Limited

River Trade Terminal River Trade Terminal Co. 1 33 River trade terminal Co. Ltd. Ltd.

Tinyau Company Tinyau Company Limited 50 Property investment Limited

A46 Principal Jointly Controlled Entities (cont’d)

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities

+ Topcycle Development Limited 50 Property investment

+ Uttoxeter Limited Uttoxeter Limited 30 Property development

# Wolver Hollow Wolver Hollow Company 50 Property investment Company Limited Limited

Xipho Development Company 33.3 33.3 Property development Limited

+ + The financial statements of these companies have been audited by firms other than Deloitte Touche Tohmatsu. The aggregate net assets and profits after taxation of these jointly controlled entities attributable to the Group amounted to 1998 HK$2,055 million (1998: HK$1,827 million) and HK$40 million (1998: HK$83 1998 million) respectively.

# # Companies with year ends not co-terminous with that of Sun Hung Kai Properties Limited.

Notes:

1. 1. Incorporated in British Virgin Islands.

2. 2. Incorporated in Bermuda.

A47 Principal Associated Companies

The directors are of the opinion that a complete list of the particulars of all associated companies will be of excessive length and therefore the list following contains only the particulars of associated companies which principally affect the profit and loss account or assets of the Group. A complete list of all associated companies will be annexed to the Company’s 1999 annual return.

Unless otherwise stated, all principal associated companies are incorporated and operating in Hong Kong and unlisted.

Percentage of issued ordinary share capital held

Name Note The Company The Group Activities

#+ Autotoll Limited 25 Tollway system management

#+ The Kowloon Motor Bus 1 33.15 Public transportation Holdings Limited (listed in Hong Kong)

#+ Ranex Investments Limited 29 Property development

+ SmarTone Telecommunications 1 26.43 Mobile telephone Holdings Limited system operation (listed in Hong Kong)

#+ The Hong Kong School of 30 Driving school Motoring Limited

# Thomas Cook Hung Kai Thomas Cook Hung Kai 25 Money exchange Airport Currency Airport Currency services Exchange Limited Exchange Limited

+ + The financial statements of these companies have been audited by firms other than Deloitte Touche Tohmatsu. The aggregate net assets and profits after taxation of these associated companies attributable to the Group amounted to 1998 HK$2,685 million (1998: HK$1,923 million) and HK$403 million (1998: 1998 HK$553 million) respectively.

# # Companies with year ends not co-terminous with that of Sun Hung Kai Properties Limited.

A48 Notes: 1. 1. Incorporated in Bermuda.